EUR/USD: Begins to lose some of the impetus in the recovery – Weakness as a chance to buy? [Video]
|EUR/USD
There is a strength to the recovery run on the euro which has pulled EUR/USD towards an ongoing test of resistance at $1.1145. However, two consecutive candlesticks have failed in a breakout and the bulls are just beginning to lose some of the impetus in the recovery that has got them this far. This could simply be part of the process of testing the resistance, but there is a risk that a near term pullback begins to set in. The technicals remain strong, but care must be taken in that momentum is becoming stretched. We discussed yesterday that the RSI was close to around 70 which historically has been restrictive on EUR/USD (although not during the huge volatility of March), and could lend to a near term, corrective unwind. Despite this, we would continue to look for weakness to be a chance to buy. The breakout support around $1.1015 houses good support now, whilst the two week uptrend is supportive at $1.0960 today. Moving into the European session, the pair is all but flat and again consolidating under the resistance area (now $1.1145/$1.1153). The hourly chart shows momentum unwinding in this consolidation, but if hourly RSI begins to slip below 40 and hourly MACD begins to slip below neutral it could be a signal that a corrective move is building. If initial support at $1.1080/$1.1100 breaks then a correction back towards $1.1015 would be likely, although this would then be the source of the next opportunity to buy.
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