EUR/GBP Price Analysis: Bullish flag looms and target 0.8760s

The EUR/GBP slashes Friday’s gains on Monday and aims towards the 0.8500 mark after reaching a daily high near 0.8590s, though retracing on a buoyant market mood as global equities record gains. At the time of writing, the EUR/GBP is trading at 0.8530, losing 0.47%.

Upbeat sentiment weighed on the EUR/GBP

Positive news from China lifted investors’ spirits. Beijing relaxed Covid-19 restrictions, increasing the speculation that it would help abate the supply-chain pressures. However, the Ukraine-Russia conflict remains in the backdrop, and further escalation and extension of hostilities are set to keep global inflation high.

Meanwhile, the EUR/GBP cross-currency pair retreated from last week’s highs near 0.8580s, dipping towards the 0.8530 area, on an increased appetite for risk-sensitive currencies, like the British pound.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP remains upward biased, despite Monday’s retracement. However, the cross-currency would face solid resistance at around 0.8600, a level last traded on May 12, which sparked a correction towards highs of 0.8390s, before resuming the uptrend towards 0.8590s. EUR/GBP traders need to be aware that volatility shrank, and the EUR/GBP formed a bullish flag, which would open the door for further gains. Nevertheless, the cross would consolidate in the 0.8500-0.8600 area before aiming toward fresh YTD highs above 0.8700.

Therefore, the EUR/GBP's first resistance would be the YTD high at 0.8618. Break above would expose the September 29 high at 0.8658, followed by the 0.8700 mark, and then the April 21 swing high at 0.8719.