EUR/USD Technical Analysis: Euro May Bounce, Trend Still Bearish
EUR/USD Technical Strategy: SHORT AT 1.1708
- Euro counter-trend line break hints down move back in play
- RSI divergence hints corrective rebound may be in the cards
- Short trade in play, invalidation on a break above mid-1.18s
The Euro broke down against the US Dollar after establishing a top near the 1.18 figure, as expected. A break below support guiding the upswing from mid-September triggered re-entry short EUR/USD at 1.1708. Prices have since stalled near the 1.16 mark, with the emergence of positive RSI divergence hinting at ebbing downside momentum that may precede a bounce.
That need not be so necessarily. RSI divergence can mark a period of consolidation before downtrend resumption. In any case, a look at the daily chart suggests any near-term gains may be little more than a correction in the context of a breach below counter-trend support defining the upswing from mid-August lows. A daily close above the 1.1815-52 area is probably needed to argue otherwise.
With that in mind, the short position will remain in play through whatever near-term gains might materialize, looking for broader weakness to re-emerge thereafter. A break below support in the 1.1510- 1.1554 area or a substantive-enough recovery toward resistance above 1.18 to reset risk/reward parameters (and duly followed by bearish resumption confirmation) will be evaluated as opportunities to scale up exposure.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.