Richard Perry
Independent Analyst
EUR/USD
As another crucial ECB meeting approaches, the sharp recovery on EUR/USD is showing initial signs of stalling. We have seen the run higher along a sharp uptrend of the past eight sessions. A succession of higher lows and strong closes have defined a run of over 350 pips, but this morning, we see signs of this move slowing down. This could be part of a consolidation in front of a key event, but after such a strong run higher, caution must be taken with long positions. It is interesting to see that the peak yesterday came at $1.1255. An upside target derived from the breakout above $1.1015 implied around $1.1250, so effectively this target has been met. Daily momentum indicators are strong but stretched. RSI is beginning to roll over a shade above 70. We have discussed previously the struggles that the 14 day RSI on EUR/USD historically has around 70 and this could be an area where the near term move begins to lose momentum. Hourly indicators are beginning to lose their momentum too. We watch for a move below the 55 hour moving average (this morning around $1.1190) as a signal of a trend breach. Hourly RSI below 40 and hourly MACD below neutral would also be a signal of reversal to watch for. A retreat into the $1.1080/$1.1145 support cannot be ruled out near term. We would though still look to use supported weakness as an opportunity to buy.
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