EUR/USD traded lower during the European morning Wednesday after it hit resistance near the 1.2420 level. However, the slide was stopped near the 1.2375 zone, marked by yesterday’s low. Despite the latest sharp selloff, the currency pair continues to trade above the prior downside resistance line drawn from the peak of the 16th of February, and also above the upside support line taken from the low of the 9th of January. Therefore, we believe that the short-term outlook remains cautiously positive.
If the bulls manage to take charge from current levels, then we may see them targeting once again the 1.2420 resistance zone. A clear break above that zone could carry more upside extensions and perhaps pave the way for yesterday’s high of 1.2475.
Taking a look at our short-term oscillators though, we stay cautious that the pair may continue correcting lower. The RSI turned down, fell below its upside support line, and now appears ready to fall below 50. The MACD, although positive, lies below its trigger line and points south as well.
A clear break below 1.2375 could confirm the case of further retreat, perhaps for a test near the aforementioned prior downside resistance line as a support this time. That said, even in such case, we see a decent likelihood for the bulls to jump in near that line.
We would like to see a clear move below that line and the 1.2320 support before we abandon the bullish case and step to the sidelines. In order for the short-term outlook to turn negative, a clear dip below 1.2285 is needed, we think. Such a break could set the stage for more declines, perhaps towards the next support of 1.2250.
As for the bigger picture, in all the aforementioned scenarios, the pair would still be trading above the longer-term uptrend line drawn from the lows of April 2018, something that, in our opinion, keeps the broader uptrend intact.
