EUR/USD bounce in play, but upside may be limited...
EUR/USD made headlines for briefly dropping below parity (1.00) for the first time in nearly 20 years in mid-July, then again throughout most of last week’s trade, but the pair is starting this week’s trade on a bullish note as it peeks above that key psychological level.
Interestingly, the pair’s RSI indicator is showing a bullish divergence with rates over the last two lows, meaning that price made a lower low (so far) while the RSI has made a higher low; these types of divergences show waning selling pressure and are often seen at lows in a market.
That said, the medium- and longer-term trends are still pointing lower in EUR/USD, so even if we do see a bounce over the next week or two, sellers are still likely to emerge around the 50-day EMA near 1.0200. As the chart below shows, that moving average has reliably capped any counter-trend bounces since February.
Meanwhile, a break below last week’s low would likely erase the bullish divergence and point toward a continuation of the downtrend toward 0.9800 or lower next.
Interestingly, the pair’s RSI indicator is showing a bullish divergence with rates over the last two lows, meaning that price made a lower low (so far) while the RSI has made a higher low; these types of divergences show waning selling pressure and are often seen at lows in a market.
That said, the medium- and longer-term trends are still pointing lower in EUR/USD, so even if we do see a bounce over the next week or two, sellers are still likely to emerge around the 50-day EMA near 1.0200. As the chart below shows, that moving average has reliably capped any counter-trend bounces since February.
Meanwhile, a break below last week’s low would likely erase the bullish divergence and point toward a continuation of the downtrend toward 0.9800 or lower next.
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