EUR/USD: Bullish tinge, but hard to be optimistic longer term

A minor corrective rally could be on the cards, the EUR/USD technical charts indicate.
Italy uncertainty lingers, central bank divergence favors the EUR bears.

Omkar Godbole FXStreet Contributor

The EUR/USD created a bullish inside-day bullish inverted hammer candle on Thursday, signaling the sell-off from the April 17 high of 1.2414 has run out of steam.

A positive follow-through (i.e. a close today above 1.1750) would confirm a short-term bullish reversal. The 14-day relative strength index (RSI) has been showing oversold conditions since May 2. Hence, the pair could find acceptance above 1.1750 today and may rise even further if the US durable goods figure, scheduled for release at 12:30 GMT, disappoints expectations.

However, the probability that the EUR will post big gains after bullish reversal is low as Italian uncertainty lingers. The ratings agency Standard & Poor’s has warned that the ‘minibot’ plan being prepared by anti-euro Lega nationalists and the Left Five Star Movement would establish a parallel currency system that could spook the financial markets.

Further, the ECB minutes released yesterday showed the central bank is in no hurry to change its current monetary policy stance. Meanwhile, the Fed is seen raising rates three more times this year, according to a Reuters poll. The growing monetary policy divergence favors the US dollar.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik says the unattractive EUR will continue to remain under pressure.

Support levels: 1.1695 1.1660 1.1620

Resistance levels: 1.1745 1.1790 1.1830

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Oversold	Shrinking
1H	Bearish	Oversold	Shrinking
4H	Bearish	Neutral	Shrinking
1D	Bearish	Oversold	Low
1W	Bearish	Oversold	Shrinking
Updated May 25, 04:15 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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