EUR/GBP technical analysis: Head-and-shoulders breakdown likely

• EUR/GBP's 4-hour chart shows a head-and-shoulders pattern.
• A breakdown would create room for a drop to 0.8857.

EUR/GBP has created a head-and-shoulders bearish reversal pattern on the 4-hour chart with neckline support at 0.8954.

A 4-hour close below that level would confirm breakdown and open the doors to 0.8857 (target as per the measured move method). 

The head-and-shoulders breakdown looks likely, as signs of bullish exhaustion have emerged on longer duration charts. For instance, the weekly chart shows multiple candles with long upper wicks, marking failure to keep gains near/above 0.90.

Further, the daily MACD histogram has turned bearish and the weekly MACD indicates the bullish momentum has weakened over the last four weeks.

The case for a head-and-shoulders breakdown would weaken if the pair rises above 0.9005, invalidating lower highs pattern on the 4-hour chart. As of writing, the pair is trading at 0.8965.

4-hour chart

Trend: Bearish

Pivot points