TA of the Day: Is EUR/USD’s Steep Ascent Setting Up for a Reversal?

The US dollar is falling sharply, causing the EUR/USD pair to rise.

The dollar’s weakness has fueled dovish comments from Fed officials, especially on the gradual approach to interest rate cuts.

This sentiment is supported by recent US economic data (covered in our weekly summary) which points to a decline in inflation, although concerns about economic resilience remain.

There are growing expectations that Federal Reserve Chairman Jerome Powell will signal a potential interest rate cut during the upcoming Jackson Hole symposium later this week.

While the extent of mitigation is unknown,Comments from Federal Reserve officials, including Minneapolis Fed President Neel Kashkari, suggest that a September rate cut is likely due to high unemployment.

Meanwhile, the European Central Bank remains cautious about committing to a specific path of interest rate cuts, providing additional support to the euro.

Market participants are closely watching the actions of the two central banks as they assess the implications of currency moves.

Fundamentals are bullish for the euro, but what about the technical indicators?

Welcome to Teaching Assistant of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of EUR/USD Based on the 4-hour chart:

📈 Technical analysis of EUR/USD on 4-hour chart

Let’s analyze EUR/USD Using the basic technical analysis concepts we covered in our Forex course.

Simple Moving Averages (SMAs):

• 10 period simple moving averageIt is located at the level of 1.1041. The current price is above This level indicates strong short-term bullish momentum. The slope is steep. To the topreflecting the recent surge in buying pressure.
• 50 period simple moving averageLocated at 1.0970. The price is good. above This level, which reinforces the ongoing uptrend in the short term. To the top The 50 simple moving average slope indicates strong medium-term strength.
• 100 period simple moving averageIt is located at the level of 1.0917. The price is also above This level, indicating that the medium-term bullish momentum is intact. The slope is To the topwhich supports the continuation of the upward trend.
• 200 period simple moving averageLocated at 1.0890. The price is good. above This level indicates a strong long-term bullish momentum. The slope is To the topconfirming the long-term uptrend.

Relative position of moving averages:

• the The 10-period simple moving average is currently above the 50-period, 100-period and 200-period simple moving averages.indicating a strong short-term uptrend within a general bullish environment.
• the The 50-period simple moving average is also above 100 and 200 period simple moving averagesconfirming the continuation of the upward pressure across all time frames.

Relative Strength Index (RSI):

• the Relative Strength Index It is currently at 77.83, indicating that the market is in Overpriced province.
• This suggests that despite the current momentum being strong, there may be potential for a short-term pullback or consolidation before any further upward movement.

🕵️ Key Notes

Price action:

Let’s analyze the recent price action of the EUR/USD pair based on the chart:

1. Strong uptrend: The most notable feature is the strong uptrend, which has become particularly evident since early August.
2. sharp rise: We have seen a sharp and almost vertical rise in recent days, with the price moving from around 1.0950 to above 1.1080.
3. Minimum declines: During this recent uptrend, there have been very few major pullbacks, indicating strong buying pressure.
4. Breakout above resistance: The price broke several previous resistance levels, including the psychological level of 1.1000.
5. Acceleration trend: The uptrend has accelerated significantly in the last few candles, indicating increasing bullish momentum.
6. Rebound from support: Earlier this month, we saw a major bounce from around the 1.0800 level, which served as the starting point for the current rally.
7. Non-monotheism: There has been very little consolidation or sideways movement in recent days, indicating strong directional conviction by buyers.
8. Reaching new highs: The price is constantly making new higher highs, and breaking previous resistance levels with ease.

Support and resistance levels:

• SupportsImmediate support is found at the 10-period simple moving average (1.1041) and the 50-period simple moving average (1.0970).
• resistancePsychological resistance at 1.11000.

Relative Strength Index (RSI):

• Overbought conditions: Despite the strong uptrend, the RSI indicates overbought conditions, but the price continues to rise, indicating the strength of the current move.

Market structure:

• General trend: The market structure is clearly bullish, with a strong uptrend evident across multiple time frames.
• Accumulation stage: It can be seen in early August at around 1.0800.
• Coding stage: Current strong uptrend
• Distribution stage The distribution stage has not yet appeared.

🤔 Possible trade scenarios

He is EUR/USD Buy or Sell?

The following trading scenarios are provided for educational purposes only. Since they do not include full risk management practices, they are not intended to serve as actual trading recommendations, but rather as food for thought to help you generate your own trading idea.

Long bias:

• Point of ConsiderationConsider entering a long position if the price finds support near the 10-period simple moving average at 1.1041 or on a pullback to the 50-period simple moving average around 1.0970. A break above the 1.11000 level could also provide a buying opportunity.
• Point of cancellationConsider setting a stop loss below the 50 period simple moving average at around 1.09500 to manage risk.
• potential targetWe expect a move towards 1.1150 or higher if the uptrend continues.
• RationaleStrong bullish momentum and recent breakout suggest further upside potential, with the 1.11000 psychological level being a key area to watch.

Short bias:

• Point of ConsiderationConsider entering a sell position if the price shows signs of rejection around the 1.1100 resistance level or if there is a bearish divergence in the RSI.
• Point of cancellationA stop loss should be placed above the recent high at around 1.11200 to manage risk.
• potential targetThe initial target could be the 10-period SMA at 1.1041, with further downside potential towards the 50-period SMA at 1.0970.
• RationaleOverbought conditions indicated by the RSI indicate a potential pullback or consolidation. A rejection at 1.11000 could signal a short-term reversal.

📝 TAOTD Summary

• Current positionThe price is in a strong uptrend, testing the psychological resistance at 1.11000. The bullish momentum is supported by the price trading above all major simple moving averages.
• directionThe overall trend is bullish, with the price above the 200-period simple moving average, confirming long-term strength. The short- and medium-term trends are also bullish.
• Main levelsSupport is at 1.1041 (10-period simple moving average) and 1.0970 (50-period simple moving average), with resistance at 1.11000.
• batchThe RSI indicates strong bullish momentum but signals caution due to overbought conditions.
• Market structure: The market structure indicates that the EUR/USD pair is in a strong bullish phase. This bullish view is supported by the alignment of all technical factors (price action, moving averages, momentum indicators).

The recent price action indicates a very strong bullish sentiment in the EUR/USD pair.

The price is above all major simple moving averages, and the uptrend is quite clear.

the No major setbacks And the Uptrend acceleration Indicates that Buyers have constant control.

but, RSI overbought and Slope from the last move This indicates caution, as a pullback or consolidation may be expected in the near term.

You should be wary of potential fluctuations and watch for signs. attrition Or potential reversal patterns, given the extent of the recent rally.

The key levels to watch are the psychological resistance 1.1100 above, and the support 1.1000 below.

A Breakout above 1.1100 This could lead to further gains, while Breakdown below 1.1000 This could indicate the beginning of a more significant correction.

The overall structure remains bullish until there is clarity. Uptrend break A series of lower highs is formed.