Societe Generale strategists highlight that EUR/GBP has completed a Head and Shoulders pattern and broken below its neckline around 0.8610, now seen as initial resistance. They note that GBP/USD outperformance versus EUR/USD has already pushed EUR/GBP below this level, with analysts pointing to next downside objectives at 0.8535/0.8520 and potentially 0.8475 if selling persists.

Head and shoulders signals deeper pullback

"EUR/GBP had been tracing out a Head and Shoulders pattern over the past few months, signalling potential downside risk. The pair has now broken below the neckline of this formation, denoting possibility of a deeper pullback."

"The neckline, located around 0.8610, may now serve as the first resistance. If EUR/GBP fails to cross this hurdle, the current decline could extend. The next objectives could be located at projections of 0.8535/0.8520 and 0.8475."

"In FX, the outperformance of GBP/USD vs EUR/USD deflated EUR/GBP to a daily close below 0.8610/00, forcing short covering in the pound."

"The combination of M&A flows, the stable UK political backdrop and ebbing of ECB tightening prospects could guide the cross towards next support at 0.8535/0.8520."

"Governor Bailey, speaking in Sintra, characterised the pre-conflict pricing of two rate cuts this year as “not unreasonable” in the context of the softening economy. However, he added “that was off the table in March and is off the table at the moment.”"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)