Original article credit: ActionForex.com
Article Rewrite: EUR/USD Eyes Fresh Upside Momentum, But Daily Cloud Resistance Must Be Cleared
The EUR/USD currency pair has shown signs of recovery, recently rebounding from its May low of 1.0600. However, despite the initial positive momentum, substantial resistance continues to block more meaningful gains. A conclusive breakthrough above the daily Ichimoku Cloud is required to support a more optimistic near-term outlook.
Current Market Overview
– As of the European session opening on May 13, EUR/USD trades near 1.0786, registering modest upside movement.
– Last week, the pair experienced a bullish recovery triggered by softer-than-expected US labor market data and mild retreat in the dollar strength.
– Despite the upside push, EUR/USD remains capped below critical technical levels that must be breached for the trend to become convincingly bullish.
– The pair’s effort to sustain the upward trajectory now hinges on both fundamental drivers, such as economic indicators and central bank expectations, and technical levels, such as the Ichimoku Cloud.
Technical Analysis
Daily Chart:
– EUR/USD is attempting to sustain its gains within a rising corrective structure established since bouncing off 1.0600.
– The pair continues to face rejection from the lower edge of the daily Ichimoku Cloud, forming a critical resistance zone near 1.0790-1.0820.
– A decisive daily and weekly close above this cloud resistance would represent a significant bullish development.
– If buyers can achieve that, the next upside targets include 1.0850 (50% Fibonacci retracement of 1.0980 to 1.0600 drop) and 1.0884.
– The 200-day Exponential Moving Average (EMA), currently positioned around 1.0825, adds further weight to the resistance zone.
– A failure to close above key technical barriers may attract renewed selling interest, potentially leading to fresh declines.
Ichimoku Analysis:
– The Daily Ichimoku Cloud acts as a powerful dynamic resistance, now containing a horizontal Kumo and flat Kijun-sen, signaling consolidation and strong supply at higher levels.
– The Tenkan-sen has turned slightly upward but remains below the Kijun-sen, which limits bullish potential.
– Chikou Span is still below price action and cloud, implying the long-term downtrend is intact unless bullish momentum strengthens.
Momentum Indicators:
– RSI (Relative Strength Index) stands near neutral at 50, illustrating a lack of directional conviction.
– MACD (Moving Average Convergence Divergence) shows a marginal bullish crossover, hinting at some underlying positive momentum, but the signal lacks follow-through.
– Momentum studies suggest the pair is not yet ready for a strong bullish breakout without additional fundamental or technical catalysts.
Trend Context
Medium-Term Trend:
– EUR/USD has remained under bearish pressure since the start of Q2 2024, following hawkish commentary from Federal Reserve officials and stronger-than-expected US inflation data.
– In contrast, softer economic performance in the eurozone and signals of potential monetary policy easing by the European Central Bank (ECB) have weighed on the single currency.
– Even though the latest rebound seems promising at first glance, it must be viewed within the context of the broader bearish trend.
– For a shift in medium-term orientation to occur, the pair must break and close above structural resistance and show sustained strength above the 200-day EMA.
Short-Term Trend:
– The short-term trend displays a modest bullish bias, shaped by a series of higher lows and modest rallies over the past seven trading days.
– However, each upswing has suffered from stalled momentum near region of 1.0790, reflecting the dominance of sellers at higher levels.
– Any move above the 1.0820-1.0850 resistance will require a catalyst, possibly from upcoming macroeconomic data.
Key Resistance and Support Levels
Immediate Resistance Zones:
– 1.079
Read more on EUR/USD trading.