Key Points:
- Advanced bullish bat appears on daily time frame.
- RSI Oscillator starting to reverse.
- Euro likely to retrace back above 1.09 handle in coming sessions.
The euro has seen some significant selling over the past 24 hours as the pair continues to react to the widening monetary policy divide between Europe and the United States of America. Subsequently, we have witnessed the pair initially give up the key 1.10 handle and then the 1.09 level in extension. However, some interesting technical patterns have started to appear on the hourly charts which may suggest we could see some gains over the next few sessions.
In particular, the past few days have seen the appearance of an advanced bullish bat formation, which is now nearing completion. The completion of this pattern would largely predispose the currency pair to a rally which could see it moving back above the 1.09 handle. Further supporting the bullish contention is the fact that the RSI Oscillator, having touched 40, appears to now be trending higher within neutral territory.
The moving averages are also signalling that a bullish move could potentially be afoot with the 20, 60, and 100 EMA’s all seemingly converging with price action towards the 1.09 handle. Subsequently, there is plenty of building bullish pressure for the pair that is likely to see it retracing back towards the 1.0930 (200MA) mark in short order.
The signal to work for over the next few hours is likely to be an upside breach of the 100-hr moving average. Any such move is likely to see a relatively sharp intra-day rally back towards our short term take profit point around 1.0930 and 1.0950 in extension.
However, there are some fundamental risk events looming over the next 12 hours with the EU’s economic sentiment and US Michigan Consumer Sentiment figures due out. In particular, the US sentiment data is likely to impact the market if it exceeds the forecasted 88.1. This could be a relatively likely event given the robustness of the US economic indicators of late. Subsequently, keep a close watch on the news releases lest they cause an intra-day spike of volatility for the pair.
Ultimately, the euro needs a retracement to relieve the pressure on the various oscillator’s and given the current technical indicators the time would appear to be ripe for such a move.