The retail sentiment is undecided on the direction of the EURGBP, so the majors are likely to give the pair direction. I am currently leaning towards a weaker euro based on the sentiment indicator and momentum in the EURUSD and today's good UK data should support the pound.
Forex Analysis EURGBP
European stock markets opened higher this morning after the United Kingdom reported a growth rate of 5.5% in its GDP for the second quarter of the year. Germany and the European Union release their latest unemployment rate figures later in the day with expectations of European unemployment figures dropping slightly. Other good news came from the European Union and the United States who recently announced cooperation on several technological and economic matters, including semiconductor supplies.
The ActivTrades sentiment indicator for the EURUSD is at an extreme level of bullishness which would usually suggest that there is a further move to the downside to come but the EURGBP retail traders are very balanced in their view, so maybe it is more about the US dollar than the euro when looking at the EURUSD. I also think the US dollar could come down after finding resistance but currently, I would be unwilling to bet on a direction as the politics currently around the debt ceiling, reconciliation bill, and US budgets are very much in the balance.
If we were to ignore the macroeconomics and possible risk events and just concentrate on the technical, I would be in favor of going long the euro against the US dollar now that we have swept the double bottom lows from earlier in the year. There is also a strong likelihood that the descending channel breaks to the upside.
Assuming the retail traders are on the wrong side of the EURUSD trade and there is a bigger push lower in the euro, or a move higher in the GBPUSD on the back of good UK GDP data, I am thinking the EURGBP is ripe for an intraday short.
The impulsive move up in the EURGBP from the London open on Wednesday and subsequent test of support from the swing high resistance that broke during the move, suggests to me that there is a possibility of that level breaking to the downside. In which case a classic retest of the 0.8612 level would be an ideal opportunity to take a short trade with limited risk by putting a Stop Loss above a recent swing high. On an H4 chart, the zone that would act as support is the 0.8540-0.8550 market structure pivot, which has been heavily traded these last few months.