Societe Generale strategists emphasize that the EUR/GBP pair has completed a head and shoulders formation and broken below the neck line around 0.8610, currently seen as initial resistance. They note that the outperformance of GBP/USD compared to EUR/USD has already pushed EUR/GBP below this level, with the analyst pointing to further downside targets of 0.8535/0.8520 and potentially 0.8475 if selling continues.
The head and shoulders signal a deeper withdrawal
“Over the past few months, EUR/GBP has formed a head and shoulders pattern, signaling the potential for loss. The pair has now broken below the neck of this pattern, indicating the possibility of a deeper pullback.”
“The neckline located around 0.8610 may now serve as the first resistance. If EUR/GBP fails to break above this obstacle, the current decline may be extended. Next targets may be located at the 0.8535/0.8520 and 0.8475 projections.”
“On the foreign exchange front, the outperformance of GBP/USD against EUR/USD resulted in EUR/GBP deflation to a daily close below 0.8610/00, forcing the covering of the short position in the pound.”
“The combination of M&A, a stable political context in the UK and the fading prospects of ECB tightening could push the stock towards the next support level at 0.8535/0.8520.”
“Governor Bailey, speaking in Sintra, characterized the pre-conflict price of two interest rate cuts this year as “not unreasonable” in the context of easing the economy. But he added that “this was not discussed in March and is not under consideration at this time.”
(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)
