EUR/GBP Price Analysis: Corrective pullback could be seen as an opportunity for bulls

• EUR/GBP retreated sharply from the fresh YTD peak touched earlier this Wednesday.
• The inverted head and shoulders breakout supports prospects for some dip-buying.
• Sustained break below 0.8400 is needed to negate the near-term positive outlook.

The EUR/GBP cross witnessed an intraday turnaround on Thursday and retreated around 60-65 pips from the fresh YTD peak - levels just above the 0.8500 psychological mark. The cross, for now, seems to have snapped three successive days of the winning streak and was seen trading around mid-0.8400s during the second half of the European session.

The British pound's relative outperformance followed the release of a better-than-expected UK GDP print, which showed that the economy expanded by 1.3% in A4 2021 as against the 1% estimated. On the other hand, the shared currency stalled its recent bullish run amid fading hopes of diplomacy in Ukraine, which revived fears about the economic fallout from the crisis.

From a technical perspective, the strong move up witnessed since the beginning of this week confirmed a bullish breakout through a resistance marked by the neckline of an inverted head and shoulders pattern. A subsequent move beyond the very important 200-day SMA further added credence to the constructive set-up and supports prospects for the emergence of some dip-buying.

Hence, any further decline could be seen as an opportunity for bullish traders and is more likely to find decent support near the 0.8400 mark. The said handle should act as strong base for the EUR/GBP cross, which if broken decisively might negate the bullish outlook. The corrective slide could further get extended towards the next relevant support near the 0.8335 region.

On the flip side, the 0.8500-0.8510 region now seems to act as an immediate hurdle. This is followed by a downward sloping trend-line extending from April 2021, around the 0.8535-0.8540 zone, which if cleared would set the stage for additional gains. The momentum could then allow the EUR/GBP cross to aim back to reclaim the 0.8600 round-figure mark.

EUR/GBP daily chart

Technical levels to watch