EURUSD is edging lower today as the short-term uptrend that started in early June appears to have halted. The September 28, 2022 upward sloping trendline has acted as strong resistance, pushing EURUSD towards the 50-day simple moving average at 1.0874. The current correction could also be a product of the bearish divergence that has formed between the stochastic oscillator and the recent EURUSD price action.
In addition, the remaining momentum indicators appear to be more balanced at this juncture. The Average Directional Movement Index (ADX) is rapidly approaching its 25-threshold and thus signaling a quickly evaporating bullish trend. Similarly, the RSI is a tad above its 50-midpoint and the stochastic is trying to break below its overbought territory. Such a move would clearly open the door to a sizeable correction and challenge the recent May 31, 2023 low of 1.0634.
Should the bears want to capitalize on the various bearish signals, they would have to first clear the 1.0874 level and test the support set by the 1.0711-1.0809 range that is defined by the December 15, 2022 high, the 100-day SMA and the 23.6% Fibonacci retracement of the September 28, 2022 – April 26, 2023 uptrend respectively. Even lower, they will have the chance of making a lower low in their attempt to push EURUSD towards the busier 1.0532-1.0571 range.
On the flip side, the bulls are keen on stopping the current correction by keeping EURUSD above 1.0874. They would then try to retest the 1.1032-1.1095 range that is populated by the February 2, 2023 and April 26, 2023 highs respectively. If successful, they could then record a new 2023 high and potentially set their eyes on the March 31, 2022 high at 1.1184.
To conclude, EURUSD bears are trying to take advantage of the formed bearish divergence and commence a significant downleg, eventually achieving a push below the recent 1.0634 low.
