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Risks pullback after four-day winning run

  • EUR/USD’s 4-hour chart shows a bearish indicator divergence. 
  • The pair could witness a pullback to 1.11, having failed to keep gains above 1.12 during the overnight trade. 

EUR/USD closed out in green for the fourth straight day on Tuesday, confirming the longest daily winning run since the end of December. Back then, the common currency had rallied for four consecutive trading days, starting from Dec. 26 to Dec. 31. 

At press time, the pair is trading at 1.1168, having hit a two-month high of 1.1214 on Tuesday. Notably, the common currency has risen by 400 pips in a near 90-degree manner in the last 12 days, erasing over 90 percent of the sell-off from 1.1240 to 1.0778 observed during the seven weeks to Feb. 20. 

The surge seems to have put the bulls back into the driver’s seat. However, rise to the immediate resistance at 1.1240 could be preceded by a pullback as the 4-hour chart relative strength index is beginning to diverge in favor of the bears. As noted earlier, the pair rose above 1.12 on Tuesday, however, the RSI did not confirm it by setting a higher high. 

The hourly chart RSI is also reporting a bearish divergence. The spot, therefore, could retreat to 1.11 on Wednesday. A violation there would expose the ascending 100-hour average at 1.1051. On the higher side, a move above 1.12 would shift the focus to the resistance at 1.1240 (Dec. 31 high). 

4-hour chart

Trend: Pullback likely

Technical levels

 

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