Graphically, it is clear that the underlying momentum is strongly bullish on EUR / USD. Granted, the market has been consolidating for several weeks around $ 1.1950 and $ 1.1745, but it is not making a significant retracement towards the support levels.
For the moment, prices are moving in a short-term channel, however several elements are calling for a correction. The RSI indicator has confirmed a bearish divergence, so it should lead to a pullback towards the 50-period moving average at $ 1.1590. In addition, the euro crossed upward on July 23 a very long-term bearish slant (in black) in place since 2008. Consequently, a pull-back on this “trendline” in order to confirm the break, would allow a take of support near the MM 50 periods. Meanwhile, the DXY dollar index has also validated a divergence, but bullish, this should pave the way for a technical rebound for the US dollar.
This scenario will be further reinforced with an incursion of prices below the lower limit of the channel coupled with support at $ 1.1745. Finally, the pair lacks fuel to resume its upward path, however a close above $ 1.1950 would invalidate this bearish strategy.