EUR/GBP Analysis: Triangle Breakout Attempt Following an Uptrend

On 13 August, the UK Office for National Statistics (ONS) reported that GDP growth slowed to 0.4% quarter-on-quarter in the second quarter, down from 0.6% in the first quarter. The figure was in line with expectations, and the market reaction was relatively muted.

The interest-rate backdrop has also remained broadly unchanged for several weeks. On 30 July, the Bank of England kept its policy rate at 3.75%, while the ECB left its rate at 2.25% on 23 July. With both decisions largely priced into the market, the absence of fresh guidance from either central bank means that short-term EUR/GBP price action may be driven more by technical factors than by the latest macroeconomic data.

Technical Analysis of EUR/GBP

The second half of July saw a strong upward move in EUR/GBP, with the pair climbing from below 0.8460 to a peak near the current resistance level at 0.8586.

The rally was followed by a consolidation phase. Since the beginning of August, price action has gradually narrowed into a pattern resembling a symmetrical triangle, with the trading range becoming progressively tighter.

On Monday, 10 August, the pair broke below the lower boundary of the formation. EUR/GBP is currently trading beneath both the triangle’s lower trendline and the lower boundary of the current market profile at 0.8553, while testing the latter from below. If this retest is successful and the downside move gains momentum, the green support level around 0.8533 could become increasingly important.

A false breakout, however, would shift attention back towards the upside. In that scenario, the pair would face several technical barriers: the Point of Control (POC) at 0.8564, the upper boundary of the profile at 0.8580, and the key resistance level at 0.8586.

The RSI + MAs indicator currently shows readings of 48, 40 and 43. The bearish signal has failed to develop further, while the RSI has moved back into the neutral zone, suggesting that momentum remains inconclusive.

Key Takeaways

The attempted downside breakout has pushed EUR/GBP outside the profile in which the recent consolidation developed. The next directional move may depend on whether the pound receives additional support from the Bank of England as the central bank determines its subsequent policy course.

For now, the technical setup remains vulnerable to a false breakout, with the 0.8553 retest likely to be particularly important in determining whether sellers can maintain control or the pair returns to the consolidation range.

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