EURGBP has formed lower highs and lower lows to create a falling channel visible on its 4-hour time frame. Price is currently testing the resistance, and technical indicators hint where it might go next.

The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that resistance is more likely to hold than to break. Price is also hitting a ceiling at the 200 SMA dynamic inflection point.

Stochastic is turning lower from the overbought zone to signal a return in selling pressure as well. The oscillator has room to head south before reflecting oversold conditions, so sellers could stay in control for much longer. RSI is moving sideways to signal consolidation.

The eurozone is scheduled to release its flash CPI readings today, and stronger than expected price pressures might spur expectations of ECB tapering. On the other hand, weak data could signal that the eurozone is far from seeing tighter monetary policy.

Meanwhile, there are no major reports due from the UK throughout the week, but it’s worth noting that BOE head Bailey has a speech coming up on Thursday. Any indication that the central bank might be considering tapering total asset purchases soon could be bullish for the pound.

Risk-off flows could also favor the lower-yielding euro, and the upcoming NFP release might have an indirect impact on this pair. In particular, strong US jobs data could spur risk-off flows since this might put the Fed closer to tapering and eventually increasing borrowing costs. In turn, this could boost demand for the euro versus the pound.

On the other hand, downbeat US jobs figures could confirm that stimulus would stay in place for much longer, which might then favor the higher-yielding pound.