The EUR/USD cracked the 1.36 level last week, but found support around 1.3885.
This week, EUR/USD had another bearish attempt from that tested the 1.35885 level and respected it again as support. In the 1H chart, you can see that this is forming a double bottom as we get started with the 6/3 US trading.
The 1.3650 level is the “neckline” of this double bottom. Price is taking off sharply at the start of the 6/3 US session. It should be noted that the surge followed Eurozone inflation data.
CPI Flash Estimate (y/y) May: 0.5%
You can see that inflation has been falling since 2012. Conventional wisdom says that if inflation pressure is low, the ECB should have more room to apply further monetary stimulus. This should in turn put pressure on the EUR. However, this was not the case as the EUR strengthened.
If EUR/USD breaks above 1.3650, a double bottom is complete. Then, if there is a pullback, let’s see how the market reacts the double bottom already in place. If price can hold north of the “central pivot” around 1.3625, a bullish outlook could be developing.
The 1.3770 pivot is the first key resistance above 1.3650. If price holds below 1.38, the double top seen in the daily chart would still be in place. Above 1.38, a bullish continuation scenario should be considered, with upside toward the 1.39 handle, and the 2014-high around 1.3990.
This bullish scenario all starts with a break above 1.3650. Note that this would also break back above the 200-day SMA preserving some bullish technical conditions. Before that, the mode is still neutral in the intra-day time-frame, while the prevailing bearish swing remains intact.
If price falls below 1.3626, the double bottom should be seen as part of a consolidation/correction, and the prevailing downtrend for almost a month will still be in focus. The daily chart shows that the next support below 1.3685 will be around the 2014-low at 1.3476.
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