Remember the head and shoulders chart pattern on EURGBP yesterday? It would look like the currency pair is already trading below the neckline support at 0.8890. This followed after data from Germany failed to meet forecasts while a consumer spending report from the UK topped forecasts.
Yesterday, Germany’s industrial production report for April showed a 17.9% contraction which was more than the expected decline of 16.0%. On the other hand, today’s BRC retail sales monitor for May revealed that spending rose by 7.9%. It was only anticipated to post a 3.0% increase.
When you enroll in our free forex trading course, you will learn that a break of neckline support of a head and shoulders pattern is often interpreted as a sign of further selling ahead.
A closer look at the recent price action on the 1-hour time frame further supports this bearish assumption. EURGBP has recently been consolidating. Because this follows a sharp sell-off, a bearish flag chart pattern has become apparent. A close below the Asian session lows at 0.8866 could mean that the currency pair may soon fall to its May 13 lows at 0.8806.
Don’t Get Too Excited Selling EURGBP
On the other hand, if there are still enough buyers left in the market, EURGBP could retrace some of its losses to the 23.6% Fib level (when drawing the Fibonacci retracement tool from the high of June 8 to today’s lows). This near-term resistance at 0.8880 also corresponds to the falling trendline when you connect the highs of June 5 and June 8. A strong close above this price may even suggest that there could be enough bullish momentum to potentially push EURGBP to its June 8 highs at 0.8929.