EUR/USD technical analysis: Off 3-week lows, 4H chart shows falling wedge pattern

EUR/USD's 4-hour chart is reporting a falling wedge pattern.
A wedge breakout looks likely with bullish RSI divergence.

Omkar Godbole FXStreet Contributor

EUR/USD is currently trading at 1.1203, having hit a low of 1.1193 in the overnight trade – a level last seen on June 19.

Notably, the recent drop from 1.1412 has taken the shape of a falling wedge pattern on the 4-hour chart. A falling wedge comprises of trendlines connecting lower highs and lower lows in contracting range – a sign of bears losing stream.

As a result, a breakout is often followed by a rally. In EUR/USD's case, a move above the upper edge of the falling wedge, currently at 1.1217, would confirm a breakout and open the doors to a retest of 1.1264 (4H 200-candle moving average).

A breakout looks likely as the 4-hour chart relative strength index (RSI) has created a bullish divergence. The prospects of wedge breakout, however, would weaken if the pair finds acceptance below 1.1193, invalidating the bullish divergence of the RSI.

4-hour chart

Trend: Bullish above 1.1217

Pivot points

1. R3 1.1249
2. R2 1.1235
3. R1 1.1222
PP 1.1207
1. S1 1.1194
2. S2 1.118
3. S3 1.1167

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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