Monthly Chart
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While the senior bear trend is pulling the currency pair closer, upward sloping patterns are attempting to reinforce the bullish themes. The broken senior channel suggests that traditionally, the pair should retrace to the broken trend-line in order to extend the gains towards significant levels above. This, however, was not quite the case. Although the rate did consolidate and target the upper trend-line, the stabilization was situated just above the channel line and continued along a flatter trend-line with little intention to actually extend the rally towards higher levels, leading it to take the form of another channel up. An ascending wedge implies trouble for the pair in meeting its short-term target around 0.8745, the most recent channel upper trend-line.
Daily Chart
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Strong levels for and against further bull market
What speaks in favour of further confirmations of the senior downtrend is the 55-month and 100-month SMA crossover, giving out a strong bearish signal, meaning that the current uptrend is just a part of another wave held by the senior trend-line. On the contrary, a short-term downfall could just be part of the senior channel up pattern. In any case, monthly SMAs will put up a battle against bearish developments in general, strengthened by both channels. In addition, there is still a chance for the pair to return inside the senior channel trend-lines, proving the breakout to be simply a fundamental shock caused by the Brexit vote.
A short-term downward movement will receive little help from technical factors, with the tough 0.8475/79 being the first obstacle. Further dips will be cut by either the bottom trend-line of the inferior wedge, or the weekly Pivot Point at 0.8433. A break below 0.8384, the junior channel bottom trend-line, will be the first step in a bear-trend direction, opening the way to 0.8304/18 (monthly S1 & 23.6% recent gain Fibo). To sustain the trend, the pair will have to erode the aforementioned level in order to shift the risk to 0.8261, the 100-day SMA.
4 Hour Chart
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To escape the falling bias, however, EUR/GBP should disregard the wedge pattern and revert attention to the top trend-line of the junior channel. Setting near-term resistances at 0.8521/32, 0.8590/94 and 0.8693/99, the pair will have to rekindle the August peak at 0.8725. In case the rate is successful in pushing through the combined strength of the resistance and channel upper trend-line, a definite uptrend will take over. The SWFX sentiment index stands in favour of a rising scenario and so do aggregate technical indicators.
With the daily chart showing what looks like an unfinished head and shoulders pattern, support around 0.83 and resistance at circa 0.86 comes into play, meaning, if these levels are confirmed, a strong bearish pattern could take over the trend.
Aggregate Technical Indicators
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Fundamental releases fail to shake markets
Regardless significant data on British Average Earnings Index, Claimant Count Change and Unemployment Rate, which caused both positive and negative surprises amongst investors on Wednesday, the rate remained flat on a daily basis, hovering along the 0.8505 level. A European Industrial Production figure short of analyst expectations proved also insufficient to spill into the EUR/GBP market, as it failed to generate significant deviations from the opening level, leaving the job for Thursday when a set of high significance British and European data is announced. Retail Sales, the Official Bank Rate, MPC Official Bank Rate Votes and the Monetary Policy Summary will give indications on UK's economic developments, while CPIs, Trade Balance and the Spanish 10-year Bond Auction will come out in the Euro Zone.