EURGBP is trending lower inside a falling channel on its short-term time frames, and the pair might be gearing up for a countertrend setup. Price is closing in on the channel support near the .8500 major psychological mark, which might keep losses in check.

If so, EURGBP could recover to the channel top around the .8750 minor psychological mark or at least until the middle at the .8600 handle. Technical indicators are looking mixed in terms of direction.

The 100 SMA just crossed below the 200 SMA to signal that the path of least resistance is to the downside. In other words, there’s a chance the channel support could break and set off a steeper downtrend.

Stochastic seems to be pulling higher from the oversold region to signal a return in bullish pressure, and the oscillator has plenty of room to climb before reflecting exhaustion among buyers. RSI is also turning higher to suggest that buyers are in control.

There are no major reports from both the eurozone and UK economy in the next few days, so price action could hinge mostly on market sentiment.

Headlines related to the conflict between Russia and Ukraine might have a strong impact on euro price action since worsening tensions might mean more uncertainty for the region. On the other hand, signs of easing conflict could pave the way for a relief rally.

Meanwhile, the UK economy continues to be bogged down by rising inflationary pressures, as evidenced in the latest CPI release. This could force the BOE to step up its interest rate hikes, but higher borrowing costs would likely limit spending activity and hurt the housing market.

Still, it’s worth noting that there have been some green shoots in the business sectors, as the UK manufacturing and services PMIs held steady for November.