EUR/USD tumbled yesterday, breaking below the 1.1125 zone, as well as below the tentative upside support line drawn from the low of November 29th, this way completing a “failure swing top” formation. Then the rate rebounded somewhat but hit the upside line from underneath and retreated again to find support slightly above the 1.1095 zone. Having all these technical signs in mind, we would consider the short-term outlook to be somewhat negative.
If the bears are strong enough to overcome the 1.1095 hurdle, we could then see them targeting the 1.1070 area, which provided support between December 20th and 24th. If they are not willing to stop there either, then a break lower could set the stage for declines towards the low of December 6th, at around 1.1040.
Shifting attention to our short-term oscillators, we see that the RSI lies slightly above 30, and has just ticked down again, while the MACD lies below both its zero and trigger lines. Both indicators detect negative momentum and support the notion for further declines However, the MACD has been slowing down and thus, we would stay careful over another rebound before the next negative leg.
On the upside, in order to start examining whether the bulls have taken the driver’s seat, we would like to see a decisive break above 1.1170, a resistance fractionally above the high of January 8th. The rate would already be above the downside line taken from the high of December 31st, and may initially target the high of January 6th, at around 1.1205. Another break, above 1.1205, could carry more bullish implications, perhaps opening the path towards the peak of December 31st, at around 1.1240.
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