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Euro Technical Forecast 1Q 2021: EUR/USD Pullback After Breakout?

Euro Technical Forecast 1Q 2021: EUR/USD Pullback After Breakout?

Ilya Spivak, Head Strategist, APAC

EUR/USD TECHNICAL FORECAST – Q1, 2021

  • Euro looks to have broken a 12-year downtrend vs. the US Dollar
  • Challenge of key long-term resistance may prompt a retracement
  • Weekly RSI divergence warns upside momentum may be ebbing
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The Euro appears to have marked a pivotal break upward against the US Dollar with a breach of trend resistance guiding prices lower for over 12 years. A pullback may follow before any upside follow-through materializes however.

EURUSD Chart

EUR/USD monthly chart created using TradingView

Looking at the monthly chart, prices sit directly at the outer layer of the formidable 1.2231-1.2677 congestion region, the site of former support now recast as resistance. The presence of such a hefty hurdle may be enough in and of itself to inspire a reflective pause.

The weekly chart makes the case for a retracement more overt. While EUR/USD is unmistakably extending the upward trend from March lows, negative RSI divergence warns upside momentum may be is ebbing. That might set the stage for a bit of backtracking.

EURUSD Chart

EUR/USD weekly chart created using TradingView

Any such move will appear corrective unless the pair is able to establish a foothold back below the 1.19-1.20 area. Achieving as much could mark capitulation following false breakout, with dire implications. Alternatively, building a base here might set the stage for the next big leg higher.

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--- Written by Ilya Spivak, Head Strategist, APAC for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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

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