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This pair is hanging out at the very top of its ascending channel!

Is it shaping up for a countertrend opportunity? Or will we see a breakout soon?

Here are the levels I’m watching on EUR/GBP.

EUR/GBP: 1-hour

EUR/GBP 1-hour Forex Chart

EUR/GBP 1-hour Forex Chart

EUR/GBP has been cruising higher inside a rising channel for almost the entire month already.

Will it bounce again or make a break for it this time?

On the bullish side of things, I’m seeing a flag pattern at the very top of the channel suggesting that another leg higher might follow.

In addition, the 100 SMA just crossed above the 200 SMA to confirm that the path of least resistance is to the upside. Busting through the .8550 minor psychological mark might be followed by an even steeper climb!

However, Stochastic is just starting to crawl down from the overbought region to signal a return in selling pressure. In that case, the channel resistance might keep gains in check and allow EUR/GBP to retreat to nearby support zones.

I’ll be keeping an eye out for the eurozone flash CPI readings that might determine where the pair is headed next. After all, signs of weakening inflation could let the ECB sit on its hands (again!) while persistent price pressures might mean another rate hike.

There are no major U.K. reports due, so the pound might simply function as a counter currency for the rest of the week. It’s important to note that sterling is on shaky footing because of the economy’s struggle with stagflation, though!

Which way do you think EUR/GBP is headed next?

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