EUR/USD Technical Strategy: PENDING SHORT
- Euro struggling to find follow-through on chart resistance break
- Shorter-term positioning hints downtrend resumption may be near
- Waiting for breakdown confirmation to re-establish short position
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The Euro is struggling to sustain upward momentum after last week’s break above resistance guiding the move lower against the US Dollar since early June. Prices are now sitting atop this barrier – recast as support – and waiting for fresh direction cues, with two consecutive attempts to challenge the 1.18 figure ending in failure.
Range resistance lines up in the 1.1840-52 area, with a break above that on daily closing basis opening the door for a challenge of the 1.1930-56 zone. Alternatively, a move back below the former upside barrier and rising trend line support at 1.1664 paves the way to revisit the 1.1510-54 region.
Turning to the four-hour chart, the appearance of negative RSI divergence suggests upside momentum is fading, which may precede a downturn. Still, the immediate series of higher highs and lows remains intact, making it seem premature to bet on downtrend resumption.
Indeed, the dominant trajectory revealed on the monthly chart is firmly bearish, with EUR/USD confined within the well-defined bounds of a decade-long decline. A move above 1.2670 would be needed to challenge this presumption, making the recent upswing seem like an opportunity to sell rather than a reason to buy.
Still, an actionable short trade setup is absent at this point. Waiting for one to emerge seems prudent before re-establishing exposure after profit was booked last week. That may have to wait for the passage of critical event risk by way of the upcoming FOMC monetary policy announcement.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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