EURUSD: Divergence Building Up, Caution Required
Submitted by Nic Lenoir of ICAP
We have been warning for caution on EURUSD, as the market has been struggling to move lower and shows all the signs of bottoming. We have strong divergence on the 180-minute chart for the RSI, and on the daily, the second derivative of the MACD has turned, and the slow stochastic is diverging as well. The support area also coincides to the 61.8% retracement of the rally since last march and we have recently tested twice the support of the downtrend channel since the highs. We feel the market could well pull back to 1.4050 (50-dma) or even 1.4349 (200-dma).
Interestingly we see on the 180-minute chart we are breaking out at the moment through the resistance aroudn 1.3625. While we remain long term bears from 1.51/1.48, we would recommend covering shorts here at least partially or buy 1/2 month upside options to beenfit from a pull back which has the potential to be sharp especially with rumors of Greece news flying around.
Good luck trading,