In today’s technical section, let’s examine the Euro to British Pound, which is currently trading within a narrowing range — a classic pennant formation. This pattern is marked by two converging black trendlines, reflecting market indecision and reduced volatility, often a precursor to a sharp breakout.
Right now, the market is seeking direction. A breakout above the upper black line would indicate renewed bullish momentum and a signal to buy, possibly initiating a fresh upward wave.
However, from a technical perspective, a breakout to the downside might be the more interesting scenario. Such a move would complete the right shoulder of a potential head and shoulders pattern that is forming on the chart. The neckline of this formation is the yellow horizontal support, and a breakout below the lower black trendline would set that neckline as a natural target.
The breakout from the pennant could occur as early as today, and traders should be prepared for increased volatility once a direction is chosen.
Let’s see which way the market leans — bullish breakout, or a technical confirmation of a larger bearish pattern.