The EUR/GBP has been relatively quiet since the end of January, after experiencing a large ramp-up to 0.88. From here we have found ourselves in a tight trading range which consists a lower limit of 0.8400 and a high around 0.88. As a tight trading range, the longer we wait the greater the breakout will be. Considering this, I expect this summer to be farily quiet and that we will see a continuation of this consolidation with a mild bearish tendency.

As shown here, price is forming a fairly sizeable triangle formation which inherently looks rather bullish but I think for the mean time. As it stands now, many technical indicators such as RSI and stochastics are indifferent and so have no bias as it stands - of course this can change fast.

Right now, some levels to consider are

R3 - 0.86650 - Recent swing high
R2 - 0.86000 - confluence of highs and psychological level
R1 - 0.85450 - Trendline from the highs
S1 - 0.84500 - noted demand from institutions
S2 - 0.84000 - Strong support, double bottom and Psychological level
S3 - 0.82850 - 50% fib level of recent move.

As can be seen here the price action over the few weeks has been choppy and the 1 month option implied volatility level stands at 6.4 vs. over 10 in January. And when considering 1Y swaps over a 5 year time frame the EURGBP is fair value at 0.80 (500 pips below current). furthermore, when considering the 1Y swaps over a 2 year time frame the swaps value the EURGBP at 0.8320, so once again the EURGBP is seemingly overvalued. These factors will add a bearish perspective to this pair, and even though this analysis is based on technicals , the fundamentals of this pair are VERY bearish over the medium term especially considering the large growth differentials across the English Channel.

All in all, the EURGBP is likely to trade down to 0.75 over the coming year but over the summer volatility is likely to be subdued and stay in a tight trading range targeting 0.8400
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