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EUR/USD Technical Strategy: BEARISH

  • Euro drop to 2-year low vs US Dollar lands on Rising Wedge floor
  • Longer-term positioning continues to argue for a bearish trend bias
  • Confirmation needed to improve risk/reward setup on short trades

See the quarterly Euro forecast to learn what is likely to drive price action through mid-year!

The Euro has dropped to the lowest level in nearly two years against the US Dollar. At surface level, sellers now face relatively modest downside barriers at 1.1110 and 1.1024 before the 1.0778-1.0874 congestion area comes into focus, implying scope for substantial downside progress.

A look at broader daily-chart positioning cautions against such exuberance. Price action since mid-August of last year has carved out a large Falling Wedge pattern. This may be pointing to ebbing bearish momentum and precede upward reversal. The appearance of positive RSI divergence reinforces that argument.

Euro vs US Dollar chart - daily

Having said that, confirming any kind of upside reversal is a long way off. Indeed, a look at the weekly chart shows prices well within the downward trend prevailing since early 2018 and needing a close back above the 1.14 figure to suggest anything otherwise.

EUR/USD Technical Analysis: Euro Drops to 2-Year Low. Now What?

Furthermore, the monthly chart reminds that a structural decline has been in progress for over a decade. In fact, prices are on pace to close out April with a breach of range support in place since November, seemingly setting the stage for deeper losses to come.

EUR/USD Technical Analysis: Euro Drops to 2-Year Low. Now What?

On balance, this suggests the path of least resistance continues to favor the downside but the risk/reward parameters on medium- and longer-term short positions appear to be unattractive. This hints that invalidation of the daily-chart Wedge setup may be a prerequisite to lasting trend development.

EUR/USD TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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