Forex Opinion & Analysis

Technical View: EUR/USD Takes a Breather Ahead of Resistance Battle

 

  • EURUSD eases bullish tone near major obstacle
  • Holds within bearish channel ahead of FOMC minutes
  • Bulls need to drive above 1.0760 to brighten outlook

 
EURUSD has been muted around the 1.0600 level during the early European trading hours on Wednesday after five consecutive bullish days.

The pair is having a positive week, but the 20-day SMA has been a struggle. The upper boundary of the bearish channel could be a bigger threat at 1.0640, close to the 23.6% Fibonacci retracement of 1.1274-1.0447.

The technical signals remain encouraging, given the positive slope in the RSI and the stochastic oscillator. However, the former is still below the neutral mark of 50, while the latter is already in the overbought zone, indicating there are still some risks. Strikingly, the 50- and 200-day exponential moving averages (EMAs) have recently formed a death cross, promoting the market’s negative trajectory from mid-July.

If the bulls exit the channel on the upside, the 50- and 200-day EMAs could come first into view at 1.0700 and 1.0763 respectively. The latter point coincides with the 38.2% Fibonacci number. Hence, a successful bounce above it could stage a notable rally towards the 50% Fibonacci of 1.0860.

If the price stays in the downward channel and closes below the 20-day EMA, support may immediately develop around 1.0500. Then, the bears could retest October’s low of 1.0447 before sinking towards the channel’s lower boundary seen at 1.0380. Another failure there would dampen market sentiment, squeezing the price probably to 1.0316 taken from November 30, 2022.

To sum up, the latest positive rotation in EURUSD is not very tempting yet as key resistance levels stand overhead. To gain durable confidence in buying, the pair needs to break the bearish pattern above 1.0640 and strengthen above its longer-term EMAs.

 

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