EUR/USD: The pace and intensity of this latest Euro rally that began in early September, has been most impressive, with the currency pushing higher on a daily basis to now close in on next major psychological barriers by 1.4000. However, daily studies are well overbought at this point, and the risk from here is for some form of a corrective pullback before considering a bullish resumption. The key to a reversal is now entirely contingent on the daily close in the major. Although we have seen previous daily higher lows broken to the downside on numerous occasions throughout the rally, we have yet to see a daily close below the previous daily low. The market has now put in a dramatic 19 consecutive closes higher than the previous daily low, and we would therefore need to see a close below the previous daily low to officially trigger the start to a legitimate corrective decline. Monday’s bearish close opens the door for a potential break of this sequence, and we will need t see a close below 1.3665 to officially confirm. Nevertheless, until we can see a close below the previous daily low, the prevailing uptrend remains firmly intact, and a near test of 1.4000 can not be ruled out.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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