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EURUSD: A retracement pullback? #technicalanalysis

This is a technical analysis (as of GMT 16:30 on Monday) of the recent EURUSD exchange rate movement.

Last week the EURUSD exchange rate finished with a pullback to the $1.3340/50 area, after going close to $1.34 on Thursday. This was in line with our view that a certain pullback could be expected based on the bearish MACD and Stochastic divergences on the EURUSD daily graph. On Monday the decline of the euro continued to the $1.3270/80 area. Since then the euro has gained strength against the U.S. dollar and currently trades around $1.3305.


As we could see on the 1H graph (presented on the left), this is exactly the 23.6% Fibonacci retracement level of the decline from $1.3399 to $1.3277. Besides that retracement level which could act as some sort of resistance, the interesting things which could be seen here are the bullish MACD and Stochastic divergences, together with the fact that the euro is still not in the overbought zone, according to that graph. Hence, an increase of the value of the euro against the U.S. dollar in short term, if the $1.3300/05 level holds, would not be a big surprise.


On the 4H graph we see that the EURUSD rate still seems to have more room to go down (the negative MACD being one of the signs) so any increase of the euro could be regarded as a short-lived one, at least until it is not confirmed by a positive formation on the 4 hour graph. A possible target for such an increase could be the 32.8 Fibonacci level around the $1.3320/05 level.


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