EUR/USD Testing a Rising Trendline

EUR/USD Testing a Rising Trendline

The EUR/USD has been bullish since at least mid-April after making a low on the month at 1.0520. This low was above the March and 2015 low of 1.0462, so we were already seeing signs of a consolidation. After turning bullish through the rest of April and into May, EUR/USD ended last week holding under 1.1466 and retreated to start this one.

EUR/USD 4H Chart 5/18
eurusd 4h chart 5/18
(click to enlarge)

Support Factors: As we can see in the 4H chart, EUR/USD is now testing some key support factors.
1) The 1.13 psychological level might provide support at least in the near-term (intra-session time-frame).
2) Just below 1.13, we see some common resistance pivots going back to the end of April.
3) There is a rising trendline from around the 4/20-4/22 lows around 1.0660.
4) The 50-period SMA in the 4H chart resides near 1.13.

Bullish Scenario: Also, if the market is still bullish, the 4H RSI should hold above 40, and it is approaching it as the 5/19 session commenced. Because of the prevailing uptrend, we should expect a rally from the 1.13 area at least to test the 1.1390-1.14 area. Above this, there is upside risk first to 1.1466 then to the 1.15 handle. The 1.15-1.1533 area is a previous support/resistance area, so we should limit the short-term bullish outlook here.

Bearish Scenario: Now, if EUR/USD breaks below 1.13 and the 4H RSI falls below 40, we should expect further bearish correction. If a pullback fails to climb back above 1.14, that is more reason to believe there is downside risk towards the 1.1035-1.1067 support/resistance area, which coincides with another rising trendline from the April lows around 1.0520.

EUR/USD Daily Chart 5/18
eurusd daily chart 5/18
(click to enlarge)

Bearish Trend: The daily chart suggests that we should look for the bearish attempt. After all the prevailing trend was bearish, and it is too early to say that price has turned bullish. Even if the medium-term outlook has turned bullish, there is a bearish divergence as the daily RSI tagged 70, which suggests at least a short-term bearish correction.

A break below 1.10 can revive the bearish outlook, but for now, let’s limit the bearish outlook to the 1.1035 level.

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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