The EUR/GBP exchange rate maintains a steady climb higher having risen to its current 0.8677 from early December lows towards 0.8300.
Where can we expect the conversion to go next?
After rising up to the 0.87s, EUR/GBP formed a bearish shooting star Japanese candlestick pattern (circled below) on December 30.
Shooting stars indicate the possibility of a reversal in the short-term trend from up to down.
The shooting star on EUR/GBP, however, lacked bearish follow-through and the little downside there was petered out reasonably quickly.
The exchange rate went on to break above key level on the chart (red line) at the shooting star’s highs and at that point the short-term trend changed from bearish to bullish.
There is now less ambiguity in the short-term trend, which is likely to continue rising.
The next stop higher is the 0.8850 level, with confirmation coming from a break above the current day’s highs at 0.8763.
The exchange rate, however, is currently trading near the day’s lows at 0.8696 but there are signs that it is unlikely to go much lower.
The R1 monthly pivot only five points below at 0.8691 is likely to act as a tough barrier of support preventing further downside, and this adds to the bullish outlook for the pair.
The MACD momentum indicator has also moved above the zero-line which indicates the trend is now bullish and supports the growth of the young uptrend.