EUR/USD TECHNICAL ANALYSIS: BEARISH
- Euro rejected on a test of two-month range resistance vs US Dollar
- Shooting Star candlestick hints at topping as bullish conviction ebbs
- Confirmation of reversal needed to make bearish setup actionable
| Change in | Longs | Shorts | OI |
| Daily | -1% | -4% | -3% |
| Weekly | 4% | -10% | -5% |
The Euro recoiled from resistance at the top of its recent range against the US Dollar, proving prescient the warning offered by negative RSI divergence about durability of a surge to four-month highs last week. The appearance of a dramatic-looking Shooting Star candlestick at resistance now bolsters the case for draining bullish conviction. That may precede a downturn.
Daily EUR/USD chart created with TradingView
Zooming into the four-hour chart for a sense of near-term positioning, EUR/USD seems to be sitting squarely at support in the 1.1110-16 area, marked by a former resistance barrier as well as the trend line guiding prices’ latest upswing. Breaking below that looks to expose the 1.1051-65 congestion region, followed by the range bottom in the 1.0968-90 zone.
4-hour EUR/USD chart created with TradingView
On balance, this means that – capitulation at the range top notwithstanding – the bounds of the upswing from late-November lows remain intact for now. Furthermore, proximity to immediate support seems to make initiating short exposure unattractive form a risk/reward perspective. Would-be sellers may opt to wait for a confirmed break of upward-sloping support before considering the setup actionable.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
