Euro May Rebound Against US Dollar Before Downtrend Resumes
EURO, US DOLLAR, EUR/USD, TECHNICAL ANALYSIS – TALKING POINTS:
- Euro drops to 14-month low vs. US Dollar, breaks September swing low
- Positive RSI divergence warns near-term selling pressure may be ebbing
- Any upswing probably corrective within broader EUR/USD downtrend
The Euro has dropped to the lowest level since late July 2020 against the US Dollar, tellingly issuing a daily close under September’s swing bottom. That seems to argue for bearish acceleration, suggesting that sellers may now be poised to pull EUR/USD into resistance-turned-support anchored at 1.1423. That is marked by swing tops from March and June last year.
If this level is breached with confirmation on a daily closing basis, grinding through a choppy congestion area on route below the 1.12 figure may be in the cards. Positive RSI divergence warns against bearish overexuberance however. This warns that downward momentum is ebbing, which may limit scope for immediate bearish follow-through and may set the stage for a corrective bounce.
Near-term resistance is capped at 1.1630, with reversal above that eyeing upside barriers at 1.1704 and 1.1805 thereafter. The longer-term trend is pinging convincingly lower, so any upswing appears likely to be corrective for the time being. From a tactical perspective, this implies that traders might treat any immediate gains as a selling opportunity even as they opt to hold off on sizing up short-side exposure for the time being.
EUR/USD daily chart created with TradingView
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--- Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.