EURUSD CHARTANALYSIS: BEARISH
- EURUSD rejected on a test of counter-trend, Wedge top resistance
- Door looks open for larger recovery, overall bias remains bearish
- Performance at 1.13 mark seems pivotal, ECB rate decision on tap
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The Euro recoiled violently lower on a test of resistance marked by the confluence of a former counter-trend support and the top of a Falling Wedge chart formation brewing since September 2018. The case for near-term bearish follow-through seems flimsy for now however.
Prices convincingly broke above resistance guiding them lower since late March, warning that immediate selling pressure has been neutralized. Furthermore, the Wedge pattern typically carries bullish implications, reinforced here by well-defined positive RSI divergence.
With this in mind, the latest setback might be temporary as EURUSD grinds through upside barriers to secure a true breakout. It may likewise mark the end of a corrective rise that paves the way for resumption of the long-term structural decline.
Indeed, the weekly chart reveals that the downtrend from January 2018 remains very much intact. Zooming out further to the monthly chart reinforces as much, showing prices are well within the confines of a decade-long descent and seemingly poised for deeper losses after breaching support near 1.15.
The central question for traders then seems to be whether the downtrend will resume from here or after a larger recovery, if the daily chart Wedge setup plays out. Confirmation is absent for now, with performance at the 1.13 figure seemingly decisive. The upcoming ECB rate decision may offer a bit of clarity.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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