The euro has been under heavy downside pressure against the British pound since October, following the United Kingdom’s decision to push back the timing of its departure from the European Union until next year.
With the UK general election around the corner and Christine Lagarde taking over as ECB President, the EUR/GBP could be one of the most volatilitye cross-pair’s in December.
EUR/GBP medium-term price trend
The EUR/GBP is trading at its weakest level since May 2017, as the broader downtrend in the pair starts to accelerate below the 0.8500 level.
Since October, the EUR/GBP has been making bearish lower lows, while price-action appeared increasingly weak in November.
Looking at the medium-term technicals, the EUR/GBP pair could start to trade in a significantly lower price range if the April 2017 trading low is broken, around the 0.8300 level.
The expected medium-term price range for the EUR/GBP pair would then be between the 0.8300 to 0.8000 levels.
Failure to move under the 0.8300 level could provoke a relief rally back towards the 0.8500 level. Bulls would need to rally the price above the 0.8660 level in order for the EUR/GBP pair to turn bullish over the medium-term.
Traders must also be aware that the upcoming UK general election on December 12, 2019 will generate substantial amounts of volatility in the British pound and the EUR/GBP pair could be heavily affected.
EUR/GBP short-term price trend
The EUR/GBP pair remains technically bearish in the short-term, with price trades below the 0.8540 level. The 0.8540 level has acted as a major pivot point for short-term traders over the last few weeks.
Price-action surrounding the EUR/GBP pair remains volatile, given the strong advance in the British pound this week and the uncertainty surrounding the euro currency.
Any change in the positive sentiment currently surrounding the upcoming UK general election could quickly reverse the current direction of the EUR/GBP pair.
The four-hour time frame shows that a large head and shoulders pattern has been triggered, with the 0.8460 level the neckline of the bearish pattern.
Corrective upside moves cannot be ruled out until a confirmed breakout below the 0.8460 level occurs.
A move back above the 0.8500 level could provoke a much stronger upside correction, with the November monthly high, around the 0.8605 level, a potential target.
EUR/GBP technical summary
The medium-term trend surrounding the EUR/GBP remains heavily bearish while price trades under the 0.8660 level. A sustained break under the 0.8300 level could force the pair into a much lower price range.
Short-term analysis shows that a possible corrective bounce from the 0.8460 area may occur. UK election drama should continue to generate volatility in the British pound.