Key Reversal Zone Reached as Potential Technical Correction Looms on the Horizon

Central Bank

Economic

Summary:

The current inability of the bulls to establish a decisive breakout above this zone suggests that the primary bearish impulse may be poised to resume.

SELL EURGBP

EXP

TRADING

0.86999

Entry Price

0.86500

0.87500

0.87014 -0.00137 -0.16%

0.0

Pips

Flat

0.86500

Exit Price

0.86999

Entry Price

0.87500

The European Central Bank (ECB) elected to maintain its benchmark interest rates during the February policy meeting, a decision that aligned perfectly with broad market expectations. However, the accompanying rhetoric possessed a notably more hawkish undertone, as the governing council emphasized the underlying resilience of economic growth within the Eurozone. President Christine Lagarde appeared to dismiss the significance of recent inflationary moderation and brushed aside concerns regarding the Euro's recent appreciation. She noted that the common currency remains well-situated within its historical average range, signaling that currency volatility is not currently a primary concern for policymakers.

Regarding broader economic activity, current estimates suggest that Eurozone GDP is on track to expand between 0.2% and 0.3% on a quarter-over-quarter basis, bolstered largely by robust domestic demand and a resilient services sector. Recent Purchasing Managers' Index (PMI) data indicates a narrowing performance gap between the Eurozone's core and periphery economies. While the manufacturing sector and industrial production continue to grapple with persistent weakness—exacerbated by periods of heightened volatility—analysts expect that fourth-quarter GDP figures will avoid downward revisions, despite the lackluster industrial output recorded in December.

Furthermore, final Composite PMI data for January suggests a marginal deceleration at the start of the fiscal year. Nevertheless, growth projections for the first quarter remain stable at approximately 0.2% inter-quarterly. Simultaneously, investor sentiment within the region saw a remarkable recovery in February. The Sentix Investor Confidence Index surged to 4.2, up from -1.8 in January. This represents the third consecutive monthly advance, marking the highest confidence level recorded since July 2025 and reflecting a significant shift in regional optimism.

Across the English Channel, the political landscape in the United Kingdom has experienced a fresh wave of volatility following the sudden resignation of Prime Minister Keir Starmer’s Chief of Staff. Reports suggest the departure was triggered by internal friction regarding the appointment of a new Ambassador to the United States amidst ongoing controversy. This high-profile exit has exacerbated existing fractures within the Labour Party, fueling intense speculation regarding the stability of Starmer’s leadership. Market participants are monitoring these developments with heightened vigilance, as a shift in leadership could signal a transition toward interventionist fiscal policies and increased public expenditure. Such a fiscal pivot would likely exert upward pressure on British Gilt yields, complicating a macroeconomic environment already burdened by elevated inflation and stagnant growth. Key Reversal Zone Reached as Potential Technical Correction Looms on the Horizon_1

Key Reversal Zone Reached as Potential Technical Correction Looms on the Horizon_1

Technical Analysis

From a technical perspective, the EUR/GBP pair has once again encountered a formidable supply wall as it approached the 0.8741 handle. This specific price level has now acted as a significant ceiling on three separate occasions, triggering bearish rejections each time. The current inability of the bulls to establish a decisive breakout above this zone suggests that the primary bearish impulse may be poised to resume.

The pair’s structural integrity is currently supported by the 100 and 200-period Moving Averages, situated at 0.8677 and 0.8650, respectively. These levels represent a critical technical floor. A sustained close beneath this moving average cluster would likely act as a catalyst for an accelerated decline, as it would confirm a breakdown of the current corrective structure.

Our momentum analysis via the MACD reinforces this bearish outlook. The histogram is printing progressively smaller bullish bars, signaling that upward momentum is rapidly dissipating. This setup often precedes a bearish crossover, which, if accompanied by deeper red bars on the histogram, would suggest a more profound technical correction.

For the time being, the 0.8650 zone serves as the primary support target and initial objective for the bears. Conversely, if the pair manages a structural shift and closes with significant volume above the 0.8741 resistance, the current bearish setup would be invalidated, potentially opening the door for a sustained bullish extension toward recent highs.

Trading Recommendations

Trading direction: Sell

Entry price: 0.8700

Target price: 0.8650

Stop loss: 0.8750

Validity: Feb 20, 2026 15:00:00

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Key Reversal Zone Reached as Potential Technical Correction Looms on the Horizon

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