EUR/GBP inverted Head & Shoulders pattern indicates upcoming surge

Let’s review the critical patterns and targets.

Price charts and technical analysis

The EUR/GBP is moving sideways after a strong surge up. This is probably a wave 3-4 pattern (red). Let’s review:

1. The bearish correction respected the shallow 38.2-50% Fibonacci retracement levels, which is typical for a wave 4.

2. The bullish bounce showed strength (wave 1) and the bearish correction seems to be building an ABC pattern (purple).

3. A break above the 21 ema zone would confirm the bullish breakout (green arrows).

4. A break below the bottom however invalidates it (red circle).

On the 4 hour chart, price action is showing very strong bullish momentum, as indicated by our blue ECS SWAT candlesticks:

1. The divergence pattern between the bottoms (purple lines) indicated that a reversal was likely.

2. The breakout above the resistance trend line (dotted orange), 21 ema zone, and 144 ema close indicate that a strong wave 3 (orange) is taking place.

3. Intra-day continuation upward is possible in the zone above the Wizz 5 towards the Wizz 6 level.

4. Eventually a pullback via a bull flag (orange arrows) is expected to retest the Wizz 4 or 5 levels for a bounce up (green arrows).

5. Even a pullback towards the 144 ema or previous lows should act as support could indicate a bounce up. Only a break below the bottom invalidates it (red circle).

6. The main targets on the 4-hour chart are the Wizz 6 level at 0.8720, then 0.8775-0.88, followed by 0.8950-0.90.

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The analysis has been done with the ecs.SWAT method and ebook.