(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)
Following the break of long-term trendline resistance (1.6038) in July, and subsequent break of supply at 1.1857/1.1352 in August, EUR/USD, by way of two back-to-back bullish candles, welcomed 2021 in good health.
While this reasons additional upside towards ascending resistance (prior support – 1.1641) may eventually be on the horizon, before we press higher, an 1.1857/1.1352 retest is also on the cards in view of February’s correction. The primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.
Sellers spent Tuesday extending the recent retracement slide, movement that welcomed trendline support (1.0774)—an area complemented by neighbouring demand at 1.1923/1.2001.
After failing to find acceptance north of the 50.00 centreline, RSI movement, deprived of support, made its way sub 40.00 yesterday.
After withstanding three downside attempts, demand at 1.2040/1.2065 caved under the pressure of selling Tuesday, fuelled by the US dollar index (DXY) upholding a bullish tone above 91.00.
Should sellers manage to remain at the wheel, demand at 1.1962/1.1976 could make its way into the spotlight today. Interestingly, as highlighted in Tuesday’s technical writing, 1.1962/1.1976 is also housed within the daily demand zone mentioned above at 1.1923/1.2001.
Those short the textbook three-drive bearish pattern at 1.2156 (the 127.2% Fib projection) have had a good start to the week, with a near 150-pip decline.
Mid-way through London on Tuesday, sellers stormed 1.2050 support. After a swift 1.2050 retest, further weakness threw light on the 1.20 level—a key base just about every market technician will be watching today.
Based on the RSI indicator, we are seeing minor bullish divergence after failing to find grip above the 50.00 centreline.
A dip into 1.20 bids is on the table, according to chart structure.
What’s interesting from a technical perspective is while this entails whipsawing through trendline support on the daily timeframe, the 1.20 level shares space with the upper edge of daily demand at 1.1923/1.2001.
As a result, 1.20 has some reasonably strong backing and could put up a fight if tested.