Technical Analyst, Saxo Bank
Summary: EURUSD has taken out key resistance and is set for 1.1170. Medium-term EURUSD could move above 1.14
Dollar Index close to test key support at 101.30. If broken a sell-off down to around 98 is in the cards. Indicators support the bearish scenario
EURUSD closed last week above key resistance at 1.08 and is set for higher levels. RSI is still showing divergence but has broken above its falling trendline indicating it could trade out the divergence i.e., a new high on RSI is in the cards.
There is no strong resistance on EURUSD until around 1.1170. 100 and 200 weekly SMA’s are coming down providing some resistance around 1.11-1.12. If EURUSD reaches that area, which seems quite likely, a larger correction should be expected.
However, EURUSD could spike up to strong resistance at around 1.1482. That level is the peak just before the massive sell-off really hit EURUSD back in 2022.
Weekly RSI is above 60 i.e., showing positive sentiment an d no divergence supporting the bullish outlook.
For EURUSD to reverse the bullish picture a close below 1.0480 is needed.
The Dollar index took out support at around 103.20 and could be testing 101.30 shortly. There is divergence on RSI i.e., the downtrend is weakening. However, if RSI closes below the horizontal line the divergence has been traded out and new Dollar Index are likely.
If the Dollar Index closes below 101.30 a swift sell-off down to the 0.618 retracement of the entire uptrend at around 98.94 should be expected. 100 and 200 weekly SMA’s will provide some support but the Dollar Index could spike down to support at around 97.22 which is the upper level of the consolidation area in Q1 2022.
For the Dollar Index to reverse this bearish outlook a close above 104.85 is needed.
RSI divergence: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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