EUR/USD rallied yesterday after the Fed signaled it will be patient with regards to future adjustments on interest rates. The pair emerged above the resistance (now turned into support) barrier of 1.1450 to eventually hit resistance near 1.1515 overnight. Today, the rate retreated somewhat. Following last week’s ECB decision, when the pair fell below the upside support line drawn from the low of November 12th, the bulls took charge and drove the battle back above that line. What’s more, on the 4-hour chart, the price is now of higher peaks and higher troughs above a new shorter-term term upside line taken from the low of January 24th. Thus, we believe that the pair could turn up again and travel higher for a while more.
If the bulls are strong enough to take charge again soon, we would expect them to aim for another test near the 1.1515 zone, the break of which may confirm a forthcoming higher high and pave the way towards the 1.1540 barrier, defined by the high of January 11th. Another move higher, above 1.1540, may carry more bullish extensions perhaps towards the peak of January 10th, at around 1.1570. That said, before the next positive leg, we see the case for some further retreat, perhaps for a test near the aforementioned short-term upside line, or the 1.1450 zone.
Our oscillators support the notion for the rate to trade a bit lower before the bulls decide to jump into the action again. The RSI hit resistance near its 70 line and turned down, while the MACD, although above both its zero and trigger lines, shows signs of topping as well.
In order to start examining whether the bulls have abandoned the field, we would like to see a clear and decisive dip back below 1.1450. Such a move could confirm the break of the upside line drawn from the low of January 24th and may trigger extensions towards the 1.1410 hurdle. A break below 1.1410 may allow the bears to aim for the 1.1390 obstacle, marked by Monday’s low, as well as the inside swing peak of January 24th.
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