EUR/GBP: Potential Wave E Development Signals Renewed Downside Risk

EUR/GBP has staged a notable recovery from its 2025 lows, posting gains of roughly 7% during the rebound phase. While this move has improved short-term sentiment, the broader structural picture, when viewed through Elliott Wave and cycle analysis, suggests that the pair may be transitioning into a more complex corrective phase rather than initiating a sustained bullish trend.

From an Elliott Wave perspective, price action appears to have completed a complex WXY formation within wave D of a larger, still-unfinished A–B–C–D–E triangle structure. If this interpretation holds, the market is now likely progressing through wave E, which typically serves as the final, often volatile and time-consuming segment of a triangle pattern.

Wave E structures are frequently characterized by choppy, overlapping price action rather than impulsive directional moves. In this case, wave E may unfold in a three-leg corrective sequence labeled (A)-(B)-(C), which can extend the consolidation period well into the first half of 2026.

Currently, price action appears to be transitioning within the (B) leg of wave E, which may develop as a corrective formation itself, potentially even taking the shape of a bearish triangle. This type of structure often acts as a continuation setup for the next downward leg rather than a reversal signal.

If this scenario unfolds as expected, the completion of wave (B) could be followed by a final wave (C) decline within wave E. This would open the door for renewed weakness, with potential downside targets located in the 0.85–0.84 region. In an extended bearish case, price could even test the 0.83 area, aligning with the lower boundary of the broader triangle structure and acting as a key structural support zone.

Overall, while the recent recovery has been meaningful, the broader technical framework suggests caution. The current phase may represent a corrective pause within a larger consolidation rather than the beginning of a sustained bullish reversal. Traders should remain attentive to evolving structure within wave E, particularly the development and resolution of the (B) leg, as it may set the stage for the next significant directional move.