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EUR/USD Technical Outlook: Rally Fatigue?

EUR/USD Technical Outlook: Rally Fatigue?

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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?
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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

image1.png

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

image2.png

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.

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--- Written by Manish Jaradi, Strategist for DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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