FX.co ★ Sud | EUR/USD

The EUR/USD remains in a positive medium-term bullish pattern and the price is moving towards the 1.1755 area in the early European session. Technically, the two have drawn a definite recovery pattern of their previous swing low, which is an upward series of higher highs and higher lows on the daily chart. This trend structure indicates that we are still in the hands of the buyers and the recent upward trend seems to be the continuation of this wider recovery and not a temporary correctional movement. The acceptance of price above the important technical levels strengthens the perception that the bullish momentum is yet to develop. One of the key aspects of the present structure is the 100-day moving average which is upward sloping in nature and is located around 1.1635. This dynamic support has been very crucial in determining the trend in the medium term and the price has remained above such support in the recent pullbacks. That EUR/USD was able to stay above this average is a good sign of the continued demand and proves the very existence of the uptrend. Any retreat of this kind would be termed as technically healthy and the market would be able to consolidate its gains without weakening the overall structure. At a short-term, the region close to 1.1738 in line with the middle Bollinger Band is a significant intraday and near-term support. Price is over this level at the time of writing indicates that there is still bullish action in place. The middle band tends to act as a mean-reversion point in the trending environment and regular defenses of this scale would mean that buyers would be ready to intervene on small losses. A decisive closing below this zone on the day would be the first indication of loss of strength in the momentum and may lead to a further corrective movement. The bottom Bollinger Band of 1.1655 is a more notable point of support of the existing trend. The level overlaps with the previous consolidations, and it is slightly higher than the 100-day moving average, forming an intersection of technical support. A pullback against this would not exceed the confines of a normal retracement as long as the price does not exercise a vigorous bearish continuation. Any sort of break below this area, though, would question the bullish construction and imply some change towards a more neutral technical indication. On the positive side, there is evident resistance on the upper Bollinger band that is at 1.1820. This level now places a limit on the progress and is indicative of the uncertainty that the market has about taking the progress further despite the shrinking volatility. Bollinger Band compression is considered as a precursor of volatility expansion and the volatility expansion direction usually follows the direction of the trend. Technically, an opening above 1.1820 daily would thus be a positive indicator of renewed bullish action and it would have an opening to further resistance levels of 1.1900 and possibly the psychological 1.2000 in the medium term. Reduction in the width of the Bollinger Bands implies that the volatility has decreased after the recent bounce and the market is consolidating gains instead of it reversing. This kind of consolidation tends to create a foundation of continuation particularly when it happens on top of swelling moving averages and in a higher-high, higher-low pattern. The fact that price has been floating in the upper half of the band range even further confirms the bullish bias since the sellers have not yet managed to make the price make a significant move down. The momentum indicators are consistent with this structural image. The fact that the RSI is at around 59.8 indicates an upward trend without any sign of overbought markets, a characteristic of trending markets that do not establish overbought markets. Notably, RSI has not been falling short of its neutral midline on recent pullbacks which shows that bearish momentum was not strong enough and corrective moves were not followed through. All in all, EUR/USD has a solid medium-term uptrend, which supports the currency. The downside structure is characterized by key support levels of 1.1738, 1.1655 and the upward moving 100-day moving average of 1.1635, and the immediate upside resistance is at 1.1820. As long as the price is above its dynamic support and is not sustainedly broken below the middle Bollinger Band, the technical picture is in favor of selling on the downside. An established break out past the resistance would probably catalyze the next stage of accelerating the trend, whilst a failure to hold the support would indicate a transition to more intense consolidation.