US Dollar, Euro, EUR/USD - Technical Outlook:
- EUR/USD’s 15-week rally is showing signs of fatigue.
- Risk of a minor retreat.
- What are the signposts to watch?
EUR/USD TECHNICAL FORECAST – NEUTRAL
Monday’s jump on feeble momentum could be a sign that EUR/USD’s 15-week rally is showing signs of fatigue.
EUR/USD has maintained a steady uptrend after hitting a 20-year low of 0.9535 in September. While there is no sign of reversal of the short-term uptrend, a negative divergence (declining 14-day Relative Strength Index associated with rising price) on the daily charts indicates that the rally is losing steam.
EUR/USD Daily Chart
Chart Created Using TradingView
The divergence comes as the single currency is running into stiff resistance at the May 2022 high of 1.0786, coinciding with a slightly upward-sloping trendline from 2017, raising the risk of a minor retreat.
Any retreat could push it back toward immediate support at last week’s low of 1.0482. only a break below 1.0482 would confirm that the upward pressure had faded somewhat, which could extend toward the 200-day moving average (now at 1.0300).
EUR/USD Weekly Chart
Chart Created Using TradingView
Moreover, from a big-picture perspective, the rally since late 2022 appears to be corrective rather than a reversal of the downtrend. However, within the context of the correction what is unclear is the extent of the retracement, currently about 38.2% of the decline from 2021. That is, whether it could extend toward 50% retracement (around 1.0940). A break below 1.0482 could be an initial sign that cracks are developing in the rally, raising the bar of a move toward 1.0940.
--- Written by Manish Jaradi, Strategist for DailyFX.com
