The EURUSD rally from 1.0879 low recorded in October first was interrupted just below the 200 days simple moving average(in blue color). Precisely at 1.1180-1.1165 resistance area. The reversal that followed took the shape of a double top formation with a neck like at the key 1.1073 level.
The most recent short term bullish wave from 1.1000 support area managed to get the price back above the 50-days simple moving average, indicating that bears aren’t in complete control. However, retesting and facing the neckline resistance area of the earlier double top.
Usually, in strong bearish trends, upside pullbacks tend to be shallow, and fail to break key moving average or latest swing highs(resistance) levels. And it’s not the case so far.
This sideways price action is also clear on the flat 50 days moving average(in green), with a very slight upside slope.
The main question is whether the current bullish wave is a mere retest of the double top neckline, and now the price is ready to resume the bearish wave that started from 1.1180 high, or the current bullish bounce will extend further for a new retest of that high at 1.1180.
There are two key levels that might give us clue on the next most likely short term scenario, the 1.1093 level as resistance, and the horizontal support and 50-days simple moving average at 1.1045-1.1055.
If you connect the most recent main swing lows at 1.0730 and 1.0989 as on chart, and clone the trend line to the most recent swing high at 1.1180 area, a falling channel forms, with a descending resistance meeting the horizontal resistance at 1.1093.
Having that said, I would look for a the bullish wave to extend on a breakout of the mentioned resistance area at 1.1093 , for a possible retest of the resistance zone at 1.1180-1.1175.
However, do not forget that the overall trend for the EURUSD is still bearish. And I wouldn’t look for a longer term reversal unless we hold back above the 200-days simple moving average.
On the downside, a break of the support area around 1.1050 would expose the next main support around 1.1000. Only a break below 1.1000 would indicate a move back to 1.0940 and 1.0880 major low.
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