By: Mike Kulej
The larger picture of the Euro-British Pound is not clear at all, with every major price swing getting smaller. The EUR-GBP is contained by a very large triangle and we will have to wait for a breakout from that formation, before a trend emerges.
On the smaller time scales, however, the price movements are much easier to track. For example, the hourly chart shows a clearly defined down trend, from 0.8530 to 0.8355. During the last couple of days, the EUR-GBP rebounded and formed a possible Reversed Head and Shoulders formation.
What Does it Mean?
This is a reversal pattern, which, on this chart, indicates a strong possibility of the short-term trend turning to bullish. We can see the Head at the low of 0.8355, straddled by the Shoulders, both of them at the same level of 0.8395. Topping the formation is the Neckline, which connects the two minor highs at just under 0.8450.
The reversal is not confirmed until the price moves above the Neckline, which will complete the pattern. If this happens, chances for additional advance will be very good, possibly pushing the EUR-GBP higher by another 80 or more pips in a short-term uptrend.