The EUR/USD found resistance at 1.1466 a couple of weeks ago, and retreated sharply last week.
Looking at the 4H chart, we can see a market that has turned the corner on a bullish trend. Price has fallen below the 200-, 100-, and 50-period simple moving averages (SMAs) as well as a rising trendline. The bearish candles show more conviction than the bullish candles since mid-April. The RSI has pushed below 30 in the 4H chart, which shows revival of bearish momentum. It looks like EUR/USD is ready to fall back towards the 1.0520 April low, down to the March low and 2015-low of 1.0462. Whether this outlook will materialize might hinge on the markets reaction around the 1.10 area this week.
Memorial Day Pullback?
As we begin the week, we are seeing a slight bearish drift. But now, as the US, Memorial Day session starts, we should expect a rebound.
In the 1H chart, we are still seeing price drift lower after tagging the psychological level of 1.10. However the momentum is slowing and we are seeing bullish divergence. Based also on the fact that it is a holiday, we can expect a rebound – that is IF price can make it back above 1.1008. If not, the slow drift entering the Memorial Day session might continue, and we will likely have to wait until the 5/26 session for a pullback.
Limited Bullish Outlook:
If this is the case (a rally above 1.1008), we can expect a test of the 1.1043 level as a conservative bullish correction outlook. We should limit the bullish outlook to the 1.11 area, which would represent the upper support area of a previous consolidation and possibly a falling trendline coming down from 1.1466.
A break above 1.11 will be needed to revive a bullish outlook. Let’s not put too much weight on what happens today, but look at whether the market will start anchoring below the 1.10-1.11 area. If it does, the 1.0462-1.0520 area will be back in sight.
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