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