The correction ends and the downtrend resumes

• EUR/GBP ends its pullback and resumes its bearish tempo.
• The RSI is bullishly converging with price, however, which means a lack of bearish momentum accompanied by the latest move.

EUR/GBP has finished its pullback and resumed its downtrend. It broke below the September 24 low of 0.8317, confirming a lower low and extension to the next target at 0.8287, the August 2022 low.

It remains in a downtrend in the short to medium term and given the principle that “the trend is your friend”, the odds favor an extension.

EUR/GBP daily chart

That said, the Relative Strength Index (RSI) is bullishly converging with price when comparing the September 24 low to the October 1 low (dashed red lines on the chart). Although the price has fallen, the RSI has not. This signifies a lack of negative momentum accompanying the most recent selloff. This increases the risks of it getting stuck or even pulling out.

EUR/GBP has already reached the conservative target for the bearish move that started at the August 5 high at 0.8322. This is a 61.8% extrapolation of the August sale. Therefore, a larger downside beyond the target could be characterized as “higher hanging fruit” and the entire downward movement from the August 5 high may even have completely run its course.