EURUSD is recovering the lost ground from the 2 ½-year high of 1.2272, while markets are wondering whether the pair can stretch its rally to fresh highs.
In terms of trend, the upward trajectory shows no sign of fading, and with the price trading above its upward-sloping simple moving averages (SMAs) and the Ichimoku cloud, there is little concern of a trend reversal.
The RSI and the MACD, however, signal that the bullish momentum in the price may soften as the former, even though is heading northwards, has already topped twice above its 70 overbought mark, while the latter has already crossed below its red signal line. In other cautious signals, the Bollinger bands are converging, also hinting some stabilization in the market in the short run.
Should the price pull back below 1.2272, immediate support to downside corrections could come within the 1.2160 – 1.2100 area formed by the middle Bollinger band, which is also the 20-day SMA, and the 23.6% Fibonacci retracement of the 1.1600 – 1.2272 up leg. Beneath that, the ascending trendline could motivate additional selling towards the 50% Fibonacci of 1.1936 and the 50-day SMA if violated.
In the positive scenario, a decisive close above 1.2272 may see a continuation towards 1.2350, while slightly higher, the pair may face a tougher battle around the resistance line and within the 1.2400 – 1.2450 region, which has been capping bullish movements early in 2018. Beyond that, the 1.2500 mark will be the next target.
Summarizing, EURUSD is expected to consolidate its gains in the short run, with the 1.2272 peak and the 20-day SMA likely coming immediately into focus.
