Short-term trend reverses on a dime, bulls back in charge

• EUR/GBP is undergoing a short squeeze higher. 
• The upside will likely be capped at the cluster of Moving Averages situated in the 0.8450s.

EUR/GBP has suddenly reversed and shot higher on Thursday, gaining over 1.0% on the day so far. The explosive rally suggests a short squeeze is happening, and the short-term trend has reversed “on a dime”. The bulls are now back in control.  

EUR/GBP Daily Chart 

EUR/GBP will probably go higher. The next key resistance level lies at the cluster of Moving Averages in the 0.8450s. From there, a temporary pullback is likely, given the speed of the ascent. Any corrections will likely encounter support at around 0.8385, the July lows. 

One warning of the sudden reversal came from the fact that the Relative Strength Index (RSI) was converging bullishly with price (red dashed lines on the chart). This signified a lack of downside momentum and increased chances of a pullback.  

Another warning sign was that EUR/GBP has already reached the conservative target for the bear move that began at the August 5 high, at 0.8322. This raised the possibility that the whole move might have completely run its course, which appears to be the case given today’s price action.