EURUSD broke the key 1.20 resistance this week and with this momentum the price rise over 1.21. Can EURUSD keep this momentum or this move was temporary?
First of all, you should check our fundamental analysis article on EURUSD for the medium-term to understand what is causing EURUSD to get this much bullish pressure. With that info, technical analysis will make more sense.
EURUSD was in a bearish trend since 2008. This year the price broke this trend. In September and October EURUSD test back the broken trend two times and with that support the price move past 1.20. This is not ideal news for the ECB because a high euro means more deflationary pressure and inflation is already below zero. But what can ECB do? They already state that they will increase and possibly make longer asset purchases. Rates are at the lowest and will continue to stay that way for some time.
For upside moves, 2018 top 1.2550 level which is also the 2008 to date average of EURUSD, might be a good target. If you look horizontally price is 1.05-1.25 zone for some time. Over 1.2550, 1.25-1.40 zone may become the new normal for EURUSD. But for now, it is important to stay and hold above 1.20
This year, whenever daily RSI made multiple tops, EURUSD, formed and a short-term bullish trend channel the broke this channel and fell more than 2 percent. We may see the same move in the coming days. Currently, there is an uptrend and if the price continues to swing in this trend channel most likely there will be a second top in RSI. The Green trend line is a good place to start for this possible down move. This move may become the backtest for the 1.20 level.
In the medium-term, it is important for EURUSD to hold above 1.20 to continue to the 1.2550 target.