The EURUSD may have already reached a peak, despite persisting dollar weakness.
The pair has been establishing a descending channel ever since it reached a swing peak at 1.23500, which presupposes continued price depreciation. And even though the price managed to break out above its upper boundary yesterday, there is still a chance for a sharp dropdown. This would be the case if yesterday's breakout is proven to be a false one.
The price is currently testing the 100-day MA (in blue), which is powerful enough to prompt such a retracement. But even more importantly, the EURUSD appears to be developing a major 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory. Once the current retracement leg (3-4) is completed, the pair would be ready to start developing the final impulse (4-5). Hence, the longer-term sentiment remains bearish.
Overall, if the EURUSD manages to bounce back from the 1.20700 resistance decidedly, this would open up the possibility for a subsequent dropdown towards the last swing low (point 3). Conversely, a decisive breakout above 1.20700 could allow the pair to probe breaking even higher towards the next major resistance at 1.21700.
The pair has been establishing a descending channel ever since it reached a swing peak at 1.23500, which presupposes continued price depreciation. And even though the price managed to break out above its upper boundary yesterday, there is still a chance for a sharp dropdown. This would be the case if yesterday's breakout is proven to be a false one.
The price is currently testing the 100-day MA (in blue), which is powerful enough to prompt such a retracement. But even more importantly, the EURUSD appears to be developing a major 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory. Once the current retracement leg (3-4) is completed, the pair would be ready to start developing the final impulse (4-5). Hence, the longer-term sentiment remains bearish.
Overall, if the EURUSD manages to bounce back from the 1.20700 resistance decidedly, this would open up the possibility for a subsequent dropdown towards the last swing low (point 3). Conversely, a decisive breakout above 1.20700 could allow the pair to probe breaking even higher towards the next major resistance at 1.21700.
