EUR/USD tumbled yesterday after the new Fed Chair, Jerome Powell, bolstered expectations for a fourth rate hike by year end. The tumble brought the rate below a near-term upside support line, but it was stopped near the key support territory of around 1.2215. Although, the dip below the aforementioned support line is an early negative sign, we prefer to wait for a decisive break below 1.2215 before we start examining the case of a reversal.
Such a break may confirm the completion of a double top formation and could initially aim for our next support zone of 1.2165, defined by the low of the 17th of January. Another move below that level could carry more bearish implications and perhaps target the 1.2090 zone, marked by the inside swing highs of the 8th of September and 4th of January.
Shifting our attention to our short-term momentum studies though, we stay mindful that a corrective bounce may be looming before, and if, the bears decide to take charge again. The RSI shows signs of flattening near its 30 line. It could rebound from that line. The MACD, although below both its zero and trigger lines, shows signs that it could start bottoming as well. That said, as long as a potential rebound remains limited below 1.2280, we see a decent likelihood for sellers to jump in again.
On the upside, a clear close above 1.2350 would bring the pair back above the pre-mentioned upside support line and perhaps aim for the next resistance of 1.2390. However, this would still keep the rate within a sideways price structure, between 1.2215 and 1.2555. We would like to see an upside exit out of that range before we get confident that the prevailing uptrend that started in December 2016 is back in force.