Technical Analysis – EURUSD rallies above 4-month-old downtrend line

Technical Analysis – EURUSD rallies above 4-month-old downtrend line

Technical Analysis – EURUSD rallies above 4-month-old downtrend line

Christina Parthenidou, XM Investment Research Desk

EURUSD finally managed to rally above the four-month descending trendline and stretch towards a three-week high of 1.1033 on Thursday.

On the four-hour chart, the short-term oscillators are all pointing upwards, suggesting that the bullish forces could stay intact. Despite that, traders should  treat the upside correction carefully as the RSI and the Stochastics approach overbought territory at a time when the price is also flirting with the upper Bollinger band.

A decisive close above 1.1025 could see the price rising until the 1.1070 area, while slightly higher, a clear breach of the 1.1100 level would put the market’s downward pattern in doubt.

In the negative scenario, if the positive momentum fades and the price drops under the 50% Fibonacci of 1.0993 of the downleg from 1.1108 to 1.0878, the 38.2% Fibonacci of 1.0966 could take control. If the latter proves easy to get through, the sell-off may stall within the 1.0940-1.0925 area before hitting the 1.0903 mark.

Summarizing, EURUSD is facing a cautiously bullish bias on the four-hour chart, though only a climb above 1.1100 would put the four-month old downward pattern in question. 

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