The euro currency was seen weakening against the British pound over the past few weeks. This came after price action rallied to highs near 0.9263 levels earlier this year.

Price action continues to remain volatile as traders adjust to the ever changing developments as far as the Brexit talks are concerned.

What initially semed like a bullish momentum in EURGBP saw price quickly changing direction.

We now expect EURGBP to potentially turn bearish in the short term marking a stronger than expected correction in prices.

The bearish flag pattern

The EURGBP has formed a small bearish flag pattern that emerged quickly after price posted a high. This suggests that the downside momentum in EURGBP might be increasing.

The bearish flag pattern puts the minimum downside objective in price towards 0.8471. This level comes close to the main support level that is likely to be tested at 0.8386.

The bullish flag pattern

The decline to 0.8386 – 0.8471 will mark a retest of the breakout level from the larger bullish flag pattern that was formed.

However, this correction could potentially weaken the bullish outlook in price.

The week ahead will be a busy week for the British pound which could potentially bring more volatility to the price action in EURGBP.

UK Inflation and Jobs Data

The UK will be releasing the monthly inflation and jobs data that could potentially stoke expectations of hawkish rhetoric from the Bank of the England.

However, with the Brexit talks still playing in the background, we expect price action to remain choppy in the near term.