EUR/GBP Forecast: Prepping For A Downside Break?

The Bollinger bands (20MA, Std. Dev. 2) on the EUR/GBP weekly chart are narrowest since 2008 and against the backdrop of the bearish RSI divergence, indicate a potential for a big move to the downside.

Weekly chart

The narrowing Bollinger bands, also known as "squeeze", occurs when prices consolidate for an extended period of time and is usually followed by a big move on either side.

The above chart shows, EUR/GBP has been restricted to a narrow range of 0.90 and 0.87 since October 2017. So, the pair looks set for a big move, mostly to the downside as indicated by repeated failure (since October) to end the week above 20MA (moving average) and the bearish RSI divergence (confirmed in late August/early September).

View

• A weekly close below the lower Bollinger band (likely in the next couple of weeks) would confirm downside break and would shift attention to April 2017 lows around 0.83.
• Only a convincing move above the weekly 20MA would signal bearish invalidation.