Fixing larger bottlenecks with downside risk still present

• EUR/GBP pauses after temporarily falling and correcting higher.
• Momentum RSI has broken out of oversold, indicating a possible higher reversal, although the trend remains generally bearish.

EUR/GBP breaks down after correcting from below the pair made on September 24.

Despite the pullback in recent days, the pair remains in a short- to medium-term downtrend, and given a technical analysis principle that “the trend is your friend,” the odds continue to favor the bears.

EUR/GBP daily chart

More broadly, EUR/GBP has now hit the first downside target for the move that started at the August 5 high, suggesting an easing of bearish pressure. The target is the 61.8% extrapolation of the initial move down during August before the shallow channel higher than formed in early September. It is even possible that this indicates the end point of its decline, although this is not confirmed.

A break below the September 24 low of 0.8317, however, would reconfirm an extension of the downtrend to the next target at 0.8287, the August 2022 low.

The Relative Strength Index (RSI) has broken out of oversold following the September 24 rebound and this could indicate the risk of a stronger correction developing further higher. Such a move would be confirmed by a break above 0.8372, the September 25 high.