EUR/USD Technical Strategy: BEARISH
- Euro poised to challenge April low after near-term support break
- Break of 1.11 likely needed to confirm scope for lasting weakness
- Invalidating bearish bias calls for penetration above 1.13 figure
See the quarterly Euro forecast to learn what is likely to drive price action through mid-year!
The Euro’s recovery from late-April lows was rejected on a retest of counter-trend line support-turned resistance, as expected. Prices did not immediately follow through on a break of trend support on the four-hour chart, but they were likewise unable to establish a new high. The pair has now broken broader support in the 1.1175-82 area, seemingly setting the stage for a test of the swing low at 1.1109.
However, a look back at the daily chart seems to warn sellers to proceed with caution. Prices continue to oscillate within what looks to be a Rising Wedge chart formation. This pattern typically carries bullish implications, a bias reinforced in this case with the appearance of positive RSI divergence (although confirmation is still needed on a breach above the Wedge top).
On balance, EUR/USD positioning seems to imply that a near-term downswing is probably in the cards but its subsequent extension into longer-term bearish trend development is suspect. A daily close below 1.1109 is likely to be needed for downside momentum to build in earnest. A daily close above the Wedge ceiling – currency at 1.1328 – would make a compelling case for bullish invalidation.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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