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Hoping to catch corrections on big market moves lately?

I’m seeing a textbook trend setup on the 4-hour chart of EUR/GBP!

Before moving on, ICYMI, yesterday’s watchlist looked at USD/CHF’s potential new lows ahead of the U.S. PPI release after China printed its CPI numbers. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

U.S. headline producer prices fell 0.6% vs. projected 0.2% uptick

U.S. core PPI posted 0.2% gain vs. estimated 0.4% increase

Fed official Daly projects 3.4% Fed funds rate by end of 2022

IEA raised its oil demand forecast for the year

Japanese PM called for a meeting to slow rising prices

Business NZ manufacturing index improved from 50.0 to 52.7

U.K. economy shrank 0.6% in June vs. estimated 1.2% contraction

U.K. Q2 GDP indicated 0.1% contraction, following earlier 0.8% growth

U.K. industrial production fell 0.9% instead of estimated 1.3% drop

U.K. business investment jumped 3.8% vs. expected 1.2% increase

Upcoming Potential Catalysts on the Forex Economic Calendar:

U.S. preliminary UoM consumer sentiment index at 2:00 pm GMT

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: EUR/GBP

EUR/GBP 4-hour Forex Chart

EUR/GBP 4-hour Forex Chart

It’s been a steady downtrend for EUR/GBP for more than a month already. Can it extend its decline?

The pair is currently in correction mode, pulling up close to the top of the channel around the .8500 major psychological resistance.

This happens to coincide with the 61.8% Fibonacci retracement level and the 200 SMA dynamic inflection point, making it a pretty strong ceiling.

If sellers return right here, EUR/GBP could carry on with its selloff and slide back to the channel support near the .8300 mark.

Stochastic is suggesting that there’s still a bit of room for a pullback, as the oscillator is approaching the overbought region. Better wait for it to turn lower before hopping in a short play!

Moving averages are also pointing to a continuation of the downtrend, as the 100 SMA is below the 200 SMA to reflect bearish vibes.

Earlier today, the U.K. reported better than expected GDP data that painted a not-too-gloomy picture of the economy. Manufacturing and industrial production saw small declines while quarterly business investment actually posted a strong rebound.

If this is enough to get pound bulls excited about another BOE rate hike, then we might just see more gains for sterling.