EUR/USD technical analysis: Flashes green, aided by positive divergence

Anthony Charalambous, CFTe XM

EURUSD is improving from the 1.2000 mark after a price retracement from the two-month high of 1.2149 found a foothold in the region from 1.1992 to 1.1978, the latter being the 38.2% Fibonacci retracement of the up leg from 1.1703 until 1.2149. The 100- and 200-period simple moving averages (SMAs) are backing advances, while the dipping 50-period SMA is suggesting a dwindling in positive sentiment.

The falling Ichimoku lines are promoting the pullback in price. However, this negative momentum is being countered by growing positive backing signalled through the short-term oscillators. The MACD and the RSI are both in bearish territory but the MACD is rising above its red trigger line and the RSI is heading for the 50 level. The stochastic oscillator is transmitting positive price divergence and is promoting additional improvements in the pair.

To the upside, buyers may initially face a zone of resistance from the 100-period SMA at 1.2037 until the 50-period SMA at 1.2060, fortified by the 23.6% Fibo of 1.2044. Adding to this cluster of upside hindrance is the adjacent Ichimoku cloud and the high of 1.2075. In the event buying interest persists, the 1.2100 hurdle and the 1.2126 high could become the next targets to try to stimulate doubt in the climb. Yet, conquering the 1.2149 peak may be crucial to boosting confidence and positive momentum in the pair.

If sellers resurface, the red Tenkan-sen line at 1.2005 could provide some downside friction ahead of the base of 1.1978-1.1992. Diving underneath this key barrier may encourage sellers to combat the support belt of 1.1942-1.1950 and then contest the converging 200-period SMA and 50.0% Fibo, lingering slightly below at 1.1932 and 1.1926, respectively. A more profound price retraction may then sink towards the 1.1860-1.1878 zone of lows.

Summarizing, EURUSD seems to have regained a positive tone. Yet, for this bullish bearing to mature, the pair would need to navigate above the cloud and 1.2075 high.

Author

Anthony Charalambous, CFTe

Anthony Charalambous joined XM in 2019 and specializes in preparing daily technical analysis, using his years of trading experience to provide detailed forecasting for all major asset classes such as forex, indices, commodities and equities.

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