EUR/GBP Price Analysis: Bullish inverted head and shoulders pattern spotted on daily chart

• EUR/GBP gained some follow-through positive traction for the third successive day on Friday.
• The recent price action constitutes the formation of an inverted head and shoulders pattern.
• Neutral technical indicators on the daily chart warrant caution for aggressive bullish traders.

The EUR/GBP cross gained traction for the third successive day on Friday and built on this week's goodish rebound from sub-0.8300 levels. The cross maintained its bid tone through the first half of the European session and was last seen trading just a few pips below the multi-day peak, around mid-0.8300s.

A dovish assessment of the Bank of England decision last week, along with the disappointing release of the UK Retail Sales data on Friday, contributed to the British pound's relative underperformance. On the other hand, the shared currency drew support from modest US dollar weakness and extended support to the EUR/GBP cross.

Looking at the broader picture, the recent price action constitutes the formation of a bullish inverted head and shoulders pattern on the daily chart. The pattern, however, is not complete until the neckline resistance is broken. The said barrier is pegged just ahead of the very important 200-DMA, near the 0.8455-0.8460 region.

In the meantime, the 0.8400 round-figure mark could act as immediate strong resistance. Given that technical indicators on the daily chart are yet to confirm a bullish bias, the said handle is more likely to keep a lid on any meaningful upside for the EUR/GBP cross.

On the flip side, a cluster of support between the 0.8330-0.8300 area should protect the immediate downside. A convincing break below will negate the head and shoulders pattern and make the EUR/GBP cross vulnerable to resume its well-established bearish trend. The next relevant support is pegged near mid-0.8200s.

EUR/GBP daily chart

Technical levels to watch