EUR/USD technical analysis: Bulls need a break above 1.1247, CNH strength may help

EUR/USD has created a falling wedge on the 4-hour chart.
A move above 1.1247 would activate twin bullish cues.
Strength in China's Yuan may bode well for the EUR.

Omkar Godbole FXStreet Contributor

EUR/USD's ongoing pullback has taken the shape of a bullish reversal pattern on shot duration charts.

At press time, the pair is trading at 1.1201, having dropped from 1.1243 to 1.1181 on Tuesday, courtesy of the European Central Bank (ECB) President Draghi's dovish comments.

Further, the shared currency is currently down almost 150 pips from the high of 1.1348 registered on June 7. With the retreat from highs near 1.1250, the pair seems to have created a falling wedge on the 4-hour chart.

A wedge breakout would be confirmed if the spot sees a 4-hour close above 1.1216. The sentiment, however, has turned bearish following a Draghi's dovish talk and so it is better to err on the side of caution and wait for a move above 1.1247 before turning bullish.

This is because a break above 1.1247 would activate twin bullish cues: A falling wedge breakout and a violation of the bearish lower highs pattern. A 4-hour close above 1.1247, if confirmed, would open the doors to a retest of recent highs near 1.1350.

The offshore Chinese yuan (CNH) is pushing higher against the US Dollar, now trading at 6.8938, the lowest level since May 14. The CNH strength could put a bid under EUR/USD, lifting it above 1.1247.

The bearish case, however, would strengthen if the pair finds acceptance below Tuesday's low of 1.1181, which could happen if the US Federal Reserve sounds less dovish-than-expected later today. The central bank is widely expected to lat the groundwork for a rate cut later this year.

4-hour chart

Trend: Bullish above 1.1247

Pivot points

1. R3 1.1295
2. R2 1.127
3. R1 1.1232
PP 1.1206
1. S1 1.1168
2. S2 1.1143
3. S3 1.1105

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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