EUR/GBP has recently formed a two-bar reversal pattern and started descending after filling a price gap on the charts. This signals a potential reversal in the market sentiment and the end of the correction from the June 14 lows. The pair seems to be entering a bearish phase as it continues to trend lower.
The two-bar reversal pattern, which occurred on July 1-2, is a bearish sign that often indicates a shift in sentiment at a peak. Coupled with the gap-fill between 0.8472 and 0.8490, it is likely that the uptrend from the June 14 lows has ended. This suggests that EUR/GBP could be starting a new leg of the intermediate downtrend.
The daily chart for EUR/GBP shows a potential medium-term downtrend, which aligns with the bearish sentiment following the two-bar reversal pattern. The Moving Average Convergence Divergence (MACD) on the 4-hour chart has also crossed below its signal line, indicating a potential reversal from the recent highs on July 1. A break below the June 28 low of 0.8457 would confirm the bearish movement, with the next target at the June 25 low of 0.8431.
While the pair may still recover, a break above the July 1 high of 0.8499 would signal a continuation of the correction higher. The 50-day Simple Moving Average at 0.8517 would then provide resistance to the upside. Overall, the odds favor a resumption of the move lower, as indicated by the two-bar reversal pattern and bearish signals on the charts.
In conclusion, EUR/GBP appears to be rolling over and entering a bearish phase following the two-bar reversal pattern and gap-fill on the charts. The medium-term downtrend and the bearish signals from technical indicators suggest a potential continuation of the move lower. A break below key support levels would confirm the bearish outlook, while a break above resistance could signal a continuation of the correction higher. Traders should keep an eye on these levels for potential entry and exit points in the market.
