FX.co ★ Crude | EUR/USD

The recent price movement in the EUR/USD daily chart indicates a corrective recovery in a larger structure of consolidation as opposed to an affirmed trend reversal. The pair had slipped downward following the highs of December towards the 1.18201.1805 supply area, but had hit a temporary base at the 1.1720 neighborhood. This level has served as a significant demand zone since buying interest surfaced very fast during the European session forcing the price to climb again to above 1.1750. Structurally, the two are stuck in a medium-term level with lower highs developing below the descending resistance level and higher lows developing above the mid-1.16s indicating that there is still compression and not conviction. The overall movement in the daily time frame is still in the bullish nature when in a longer perspective as the two are far far above its past multi-month breakout level around the 1.1500. But the recent series of lower highs since the middle of December shows that the bullish momentum has broken as the movement shifted to the corrective or sideways mode. Inability to hold on gains above 1.1800 has made this zone a significant resistance zone, and sellers have been re-established in the zone many times. Price is likely to encounter supply pressure against upward attempts as long as price is below this region instead of developing into a lasting impulsive move. The price action on the four-hour structure also indicates a slight recovery on the 1.17201.1700 support band, which has already been violated several times. Both tests have gained customers, which proves their applicability as a short-term floor. The recovery is however not well followed through as the couple still remains weak below the counter trendline at 1.1770. This line trend is the highest point of the recent downward movement and it coincides with the previous swing peaks and this makes it all the more significant in its technical importance. There would have to be a definite accumulation of close above four hours above this area before any indication would be made that there is a shift in short-term structure to bearish rather than corrective. Another point is the 1.1770 that acts as another gateway to the stronger resistance band at 1.18051820. This area is supported by several historical highs of September and December, and this is a very important area where profit-taking and fresh selling may arising. Although price may somehow overcome the trendline, the market would still have to absorb supply in this higher resistance area before any larger bullish continuation will occur. Making new lows close to these would probably rule out the present recovery as a pullback in a bigger consolidation. On the negative, the immediate support at 1.1700 is critical towards the retention of the prevailing range structure. An authoritative decline below this would turn the short-term bias to the downside and reveal the next resistance at 1.1680 which is the December high of 4 and the December low of 11. This is an area which has been resistance and support at the same time implying that it may pull demand back. Further depreciation would then place the focus on the 1.1615 area which the lows of December 8 and 9 will create a more formidable base of demand. The relocation to this area would signify that the selling forces are reasserting control in the area. With a trend structure perspective, the market is now at an equilibrium between medium term bullish positioning and short term correctional pressure. The higher lows of the previous months have not been broken yet and the overall bullish structure has not been yet broken in terms of technology. Meanwhile, the failure to recover and maintain above 1.17701.1800 points to hesitation and no momentum among the purchasers. This balance opines that EUR/USD will tend to oscillate unless it breaks out clearly on either end. In general, the technical picture indicates a merger that is determined by specific levels of price that determine the further direction. The immediate decision zone is made up of the 1.1770 resistance and the 1.1700 support. The break out will be followed upon breaking resistance and probably extending to 1.1820 and further, and the breakdown would move the focus on 1.1680 and 1.1615. The price action will probably remain choppy until any of these situations occurs, keeping or obeying the old trend lines and horizontal levels, and not creating a good directional move.