Double failure at 200DMA and overbought conditions warn of pullback
The Euro is trading within a narrow range in early Thursday’s and still constructive, but warnings about bulls running out of steam are growing.
Long upper shadows of daily candles in past two days and double failure to register daily close above significant barrier provided by falling 200DMA (1.0417) add to risk of bull trap and possible pullback.
Stochastic is about to reverse from overbought territory and bullish momentum started to fade, adding to initial negative signals. Larger bulls are likely to take a breather on overextended daily studies and a partial profit-taking after the latest steep bullish acceleration from 0.9730 (Nov 3 trough).
Expect initial bearish signal on today’s bearish close, preferably below Fibo support 1.0304 (23.6% of 0.9730/1.0304, with dips to find firm ground at 1.0200 zone (rising 10DMA / broken bull-channel upper boundary trendline / Fibo 38.2%) and keep bulls in play.
Conversely, the pair would keep bullish bias while holding above 1.0304 pivot, but may hold in extended consolidation as long as action stays capped by 200DMA.
Bullish scenario requires final break of 200DMA to signal bullish continuation of recovery leg from 0.9535 (Sep 20 low) through pivotal 1.05 zone which would unmask June tops (lower platform at 1.0600/15 zone).
Res: 1.0417; 1.0491; 1.0550; 1.0614
Sup: 1.0363; 1.0304; 1.0271; 1.0200