EURGBP is still inside its long-term range visible on the daily time frame and currently testing the resistance around the .7400-.7450 levels. If this area keeps gains in check once more, a move back towards the range support at the .7000 major psychological level could be seen.
Stochastic and RSI are both indicating overbought conditions, which means that buyers are already exhausted. This could allow sellers to take control and push for a selloff, especially since both oscillators are starting to move lower. However, a quick return in buying pressure might still pave the way for an upside breakout.
In that case, EURGBP could climb by around 400-450 pips, which is the same height as the rectangle formation. This could take the pair up to the .7800-.7900 area or much higher. The 100 SMA just crossed above the 200 SMA, suggesting that the path of least resistance is to the upside.
Event risks for this trade today include the release of the UK manufacturing PMI, which is expected to rise from 52.7 to 52.8 and possibly allow the pound to regain ground. German preliminary CPI and Spanish manufacturing PMI are lined up from the euro zone today.
Spanish and German unemployment change figures are lined up tomorrow and these might serve as stronger catalysts for euro moves. Also due tomorrow the CPI flash estimate from the region which might have implications on future ECB action. On Wednesday, the UK services PMI is lined up and this is also usually a market-mover for pound pairs.