EUR/GBP Forecast: Bear revival confirmed, eyes 0.84

The bears have regained control as per the weekly chart.
The pair may shake out weak beards before falling to 0.84.

Omkar Godbole FXStreet Contributor

The low volatility period is history and the EUR/GBP could drop to 0.84 in a matter of weeks, the technical charts indicate.

Weekly chart

The above chart shows a bearish continuation pattern (channel breakdown), meaning the sell-off from 0.9306 (2017 high) has resumed.

Also, we see a Bollinger band squeeze and a breakdown, i.e. a period of the consolidation/period of low volatility (September 2017 to April 2018) followed by a downside break (period of high volatility ahead).

Further, the 5-week moving average (MA) and the 10-week MA are trending south, indicating a bearish setup. The relative strength index (RSI) favors the bears.

Clearly, the EUR/GBP pair looks set to test 0.8399 (38.2 percent Fibonacci retracement of the rally from the 2015 low to 2017 high) in the next month or two.

That said, in the short-run, the oversold conditions as shown by the 14-day relative strength index (RSI) could yield a minor corrective rally to the 10-day MA, currently located at 0.8702. That should not come as a surprise as the market usually shakes out weak hands immediately after a major bear/bull breakout.

Only, a weekly close above 0.8789 (March 30 high) would abort the bearish view.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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