Since falling to 1.0462 in March, EUR/USD has been consolidating. The resistance of this consolidation structure was in the 1.1040-1.1052 area.
After a third failed attempt to clear the consolidation resistance area, EUR/USD fell. The 4H chart shows the bearish breakout. Some see a break of an ascending triangle. Others see a broken double top. Here are some other observations from the 4H chart:
1) Price broke below the 200-, 100-, and 50-period simple moving averages, which reflects a return to the bearish trend, especially if price action tests the SMAs again as resistance.
2) The RSI dipped below 30, which reflects revival of bearish momentum. If it comes up but stays under 60, the bearish momentum would still be in play.
Other key notes:
1) The prevailing trend is bearish.
2) The ECB is dovish, and the FOMC is hawkish, even though it has become less so in 2015 due to disappointing data.
Given the aforementioned notes, EUR/USD should still be bearish. The first place we can look for resistance is the 1.0713 level – previous support pivot. But given the strong bullish candle, let’s give it some elbow space to the cluster of moving averages around 1.08. IF the RSI stalls around 60 as well, we should anticipate another bearish attempt at least down towards the 1.0462 low.
If price extends higher, the next key resistance will once again be the 1.1040-1.1050 area. However, since the current low missed the 1.0462 low, we should expect some “clear-out” above 1.1052.
In the daily chart, we can see that the prevailing downtrend remains bearish and there is no reason to believe that will change at the moment. If price breaks above 1.1060 and starts to hold above 1.10 then we should consider a more significant bullish correction mode.
Otherwise, look for sellers at 1.08 then again around 1.1060 just above the current consolidation high.
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