EUR/USD Technical Analysis: Euro May Bounce But Trend Points Down
EUR/USD TECHNICAL ANALYSIS: BEARISH
- Euro at 2-month low after breaking trend line set from October bottom
- Hammer candlestick, positive RSI divergence hint a bounce may be due
- Overall trend still looks bearish, suggesting a down move toward 1.07
The Euro extended downward as expected after breaking support guiding its recovery against the US Dollar since early October, sinking to a two-month low. The currency pair is now perched just above support in the 1.0968-90 congestion region.
The appearance of a Hammer candlestick here points to indecision, hinting that a bounce might be brewing ahead. Zooming into the four-hour chart seems to bolster the case for such a scenario. It shows positive RSI divergence as prices test support, implying that selling pressure may be ebbing.
Initial resistance is in the 1.1051-65 area, followed by the intersection of former support guiding the recently broken uptrend and a downward-sloping barrier defining the 2020 selloff thus far. The inflection point at 1.1149 adds reinforcement. A daily close above that may call the broader bearish bias into question.
Still, the weekly chart argues for a decidedly bearish long-term trend bias. A break of counter-trend support appears to pave the way below the 1.09 figure. Averaging the depth of prior downswings within the same trend yields 4.6 percent however. If this holds, a move toward 1.07 may be on tap.
EUR/USD weekly chart created with TradingView
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivakon Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.