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EUR/USD Technical Analysis: Euro May Bounce But Trend Points Down

EUR/USD Technical Analysis: Euro May Bounce But Trend Points Down

Ilya Spivak, Head Strategist, APAC

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.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

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.

Euro vs US Dollar price chart - 4-hour

EUR/USD 4-hour chart created with TradingView

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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.

Euro vs US Dollar price chart - weekly

EUR/USD weekly chart created with TradingView

EUR/USD TRADER SENTIMENT

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 4% -6% 1%
Weekly 10% -39% -8%
What does it mean for price action?
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EUR/USD TRADING RESOURCES

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

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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