EUR/GBP Price Analysis: Climbs to fresh YTD top, bullish head and shoulders breakout in play

• EUR/GBP gained traction for the third straight day and climbed to a fresh YTD high on Wednesday.
• The overnight move up confirmed a breakout through the head and shoulders neckline resistance.
• The stage now seems all set for a move towards testing a near one-year-old descending trend-line.

The EUR/GBP cross added to its strong weekly gains and edged higher for the third successive day on Wednesday. The momentum lifted the spot price to a fresh YTD high, around the 0.8485-0.8490 region during the first half of the European session.

The shared currency continued drawing support from the latest optimism over the possibility of a diplomatic solution to end the war in Ukraine. Apart from this, expectations that the European Central Bank will scale back its ultra-loose monetary policy as soon as year-end to tame surging inflation further underpinned the euro.

On the other hand, the fact that the Bank of England had softened its language on the need for further rate hikes acted as a headwind for the British pound. The combination of supporting factors allowed the EUR/GBP cross to build on the overnight break through the 0.8450 region - the neckline resistance of an inverted head and shoulders pattern.

A subsequent move beyond a technically significant 200-day SMA and bullish technical indicators on the daily chart supports prospects for a further near-term appreciating move for the EUR/GBP cross. Hence, some follow-through strength towards testing a descending trend-line hurdle, around the 0.8535-0.8540 region, remains a distinct possibility.

on the flip side, the neckline resistance breakpoint, around mid-0.8400s, now seems to protect the immediate downside. Any further pullback might still be seen as a buying opportunity near the 0.8430 horizontal level. This, in turn, should help limit the downside near the 0.8400 mark, which should act as strong base for the EUR/GBP cross.

EUR/GBP daily chart

Technical levels to watch