On its 1-hour time frame, it can be seen that EUR/USD is currently testing a rising trend line connecting the lows of the price. This uptrend has been holding for around a month already and the latest test could indicate whether more gains are to be expected or if the tides are about to turn.
The pair is also finding support at an area of interest at the 1.3800 major psychological support. Stochastic (14,3,3) is indicating oversold conditions, which means that euro bears are already exhausted. However, the indicator hasn’t turned from the oversold region yet, which suggests that there might be a bit of selling momentum left.
A bounce could take the pair back up to its most recent highs around the 1.4000 major psychological resistance, which was almost tested when the ECB announced its interest rate decision. From there, the pair was unable to sustain its gains when risk appetite turned sour and the FOMC made its monetary policy decision. The Fed decided to carry on with its taper and drop the 6.5% jobless rate threshold, with Yellen hinting that a rate hike might take place next year and triggering a dollar rally.
EUR/USD Technical Outlook
If the dollar’s rally will be sustained, EUR/USD might make a break below the rising trend line and area of interest. This could be a sign that the previous trend is over and that a new downtrend will form. From there, the pair could test the next visible support zones around the 1.3600 major psychological level or until 1.3400.
There are no major reports lined up from the euro zone today so there could be a chance that the previous selloff will resume, as traders try to price in expectations of a future Fed rate hike. Do take note that the US will release its initial jobless claims, existing home sales, and Philly Fed index and that weak data might force the dollar to return some of its latest gains.
To contact the reporter of the story: Jonathan Millet at email@example.com