EUR/USD traded higher yesterday, after hitting support near the 1.2055 level. The rebound took the rate above Monday’s high of 1.2115, thereby confirming a forthcoming higher high, but soon thereafter, the pair pulled back. In any case, the price structure remains of higher highs and higher lows above the upside support line drawn from the low of Apr. 5, and thus, we would consider the near-term outlook to be positive.
The current retreat may continue for a while more, perhaps even below 1.2115, but we see decent chances for the bulls to take charge again from near the aforementioned upside line. If so, they may try to lift the rate up towards the 1.2180 area, marked as a resistance by the high of Feb. 26, the break of which could trigger extensions towards the peak of the day before, at around 1.2245.
Shifting attention to our short-term oscillators, we see that the RSI turned down after hitting resistance slightly below 70, while the MACD, although above both its zero and trigger lines, shows signs of topping as well. Both indicators detect slowing upside speed, which supports the notion for some further retreat before the next leg north.
Now, in order to start examining a bearish reversal, we would like to see a decisive dip below yesterday’s low of 1.2055. This will not only take the pair below the pre-mentioned upside line, but it will also confirm a forthcoming lower low on the 4-hour chart. The bears may then get encouraged to push the action towards the 1.1992 level, marked by the low of Apr. 22, where another break may allow the decline to extend towards the low of Apr. 19, at 1.1942.