Can the EURUSD break the descending channel? This is the big question as we look at the daily chart, the pair has been moving in a descending channel. Yesterday it pierced through the upper trend line and failed to hold the level, ending below it. Today it is moving lower, still inside the descending channel.
Double bottom and piercing down
We can also observe that the EURUSD has drawn a double bottom pattern as it bounced off of the 1.13 level, a major support, in August and end of October. Another touch of this support may signal a definitive piercing down through it, potentially signalling a visit to the 1.114 level, suggested by the channel.
A bullish scenario
A possible alternative scenario sees the price move out of the channel and create another bullish leg to visit the 1.182 level. The evidence in favour of this second scenario is varied.
Firstly, the current bearish price action is rather weak. That seems evident by the existence of a meandering descending channel instead of a sharp impulsive movement.
Secondly, the US Dollar Index (DXY) is showing a diagonal ending pattern and the potential beginning of a corrective leg.
Finally, the MACD seems to be moving from a bearish phase to a bullish one.
Short-term outlook
We observe that the EURUSD is creating a short-term top so it does remain to be seen whether the EURUSD can break upwards the descending channel. Yesterday’s figure shows a Doji with a large upper shadow. That reveals the bulls has lost impetus, evidencing that the pair needs at least a small corrective action before continuing with more price advances. This outlook seems valid unless shattered by an economic news or event.
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