EUR/GBP rose on Friday after a fresh downward acceleration in the past three days failed to clearly break the Fibonacci support at 0.8552 (50% retracement of the 0.8239/0.8865 high, as well as the weekly Ichimoku cloud base) and formed a bear trap pattern on the daily chart that paves the way for a recovery.
The euro remained on the defensive due to a significant slowdown in economic growth in the eurozone, continued geopolitical uncertainty and rising energy costs, while sterling received a boost from easing political uncertainty and signals that the Bank of England may maintain high interest rates for some time as inflation remains high.
A reversal pattern is developing on the daily chart, although it still requires verification of the longer bullish daily candle on Friday and the lower daily close above the 0.8580 Fib 23.6% of the 0.8689/0.8545 bearish wave.
Noticeable bullish developments can be seen on the hourly chart contributing to the reversal scenario, while daily indicators remain mixed (moving averages in bearish configuration vs. RSI reversal from oversold territory) hindering recovery attempts.
It lifts above 0.8580 to expose a more important barrier at 0.8600 (Fibo 38.2%/10DMA), a violation of which would generate a stronger bullish signal.
On the other hand, the recovery was halted below 0.8600 to keep the bigger bears in play and provide better levels for a return to the bear market.
Accuracy: 0.8580; 0.8600; 0.8620; 0.8634
sip: 0.8545; 0.8507; 0.8478; 0.8458
