EUR/USD traded higher on Friday, after it hit support near the low of August 2nd, at around 1.1070, with the recovery continuing somewhat today as well. That said, the rate is still trading below a downside resistance line drawn from the high of June 25th, and thus, even if we see some more advances, we would consider the near-term outlook to be cautiously negative.
The rate may continue drifting north for a while more, and perhaps challenge the 1.1130 barrier as a resistance, or even the high of August 15th, at around 1.1160. Nevertheless, we see decent chances for the bears to jump back into the action from near those levels and perhaps push the rate down for another test at 1.1070. If that area fails to halt the slide this time around, its break may carry more bearish implications, perhaps paving the way for the low of August 1st, at around 1.1025.
Shifting attention to our short-term oscillators, we see that the RSI bottomed slightly below 30, crossed back above that level and now points up. The MACD, although negative, has bottomed as well and emerged above its trigger line. These indicators support the notion for some further recovery before the next negative leg.
In order to abandon the bearish case, we would like to see a clear and decisive break above 1.1190. Such a move could also bring the rate above the downside resistance line drawn from the high of June 25th and may aim for the key resistance area of 1.1230. However, we will get confident on further upside only if the bulls manage to overcome that key area. This might allow them to initially target the high of August 6th, at 1.1250, the break of which could open the path towards the 1.1282 zone that prevented the rate from moving higher on July 11th, 15th and 18th.
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