EUR/USD – Look for a Pullback for Better Entry

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EUR/USD - Look for a Pullback to Confirm Bearish Market

The EUR/USD has completed a double top as you can see on the daily chart.

The 1.3672 support was broken along with a rising trendline from Nov. 2013. This shows a shift from a bullish trend to a neutral and possibly bearish one.

EUR/USD Daily
eurusd daily chart 5/23

Even though a top seems to have formed, and a bearish market looks pending, we might want to wait for a pullback for two reasons.
1) Better entry in terms of price.
2) Better entry in terms of 4H and daily RSI reading. It may be prudent to wait for oversold conditions to be resolved before adding short positions.
3) A pullback that fizzles below 1.38 should help confirm the bearish market.

EUR/USD 4H
We can watch the 4H chart for a pullback.

eurusd 4h chart

At the moment, there is a bullish divergence forming with the RSI, which makes it unattractive to add short positions here. If short-term traders do try to buy up the EUR/USD off oversold conditions, monitor the RSI when it approaches 60. If price also stabilizes in the near-term when the RSI nears 60, get ready to short.

A bearish correction scenario has downside toward the 1.3475-1.35 area.

Earlier: USD/CHF Double Bottom; Price above 200-day SMA

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.