EUR/USD pushed to a new low on the year at 1.2165 yesterday. US GDP in Q3 advanced at an annual rate of 5.0%. This data release strengthened the USD across the board, and the EUR/USD fell.
Resistance Holding: The 1H chart shows the market stalling after hitting 1.2165. It then came back up and hovered around 1.22 during the 12/24 session so far. As we got started in the US session, we saw a push to the upside, which failed, and respected the 50-hour simple moving average (SMA), and a falling speedline. The 1H RSI was also held below 60, showing maintenance of the bearish momentum so far, even in the intra-session time-frame.
We can expect another near-term bearish attempt during the rest of the 12/24 session and into the 12/25, Christmas session.
At this point, a break above 1.2250 will be needed to introduce any outlook of a consolidation or bullish correction. Otherwise, the bearish outlook remains, with the 2012-low of 1.2042 in sight. Refer to the weekly chart below:
Oversold Signals: We can see in the weekly chart that the EUR/USD is in a sharp downtrend since July. Now, the RSI is showing oversold conditions in the weekly chart as it tags 30 and below. We also see a bullish divergence, which might give the market more reason to believe that the EUR/USD is ready for a bullish correction.
Bearish Signals: However, these oversold signals are trumped by the bearish engulfing candle last week, which signaled bearish continuation. Also, the RSI shows a negative reversal signal – a higher RSI high, with a lower corresponding price high. This suggests further downside risk.
While the downside risk remains, the market has gotten choppier since November. Now, if price indeed extends lower towards 1.2042, we should start look for support in the 1.20-1.2050 area. At that point, oversold and bullish divergence signals will be more important.
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