The EURUSD rally that started after the September 28, 2022 low of 0.9535 made a new higher high at 1.1075, surpassing the February 2, 2023 high of 1.1320. It has not been a one-way street higher, but euro bulls managed to recover from the early March 2023 dip. The recent price action appears to have formed a nicely structured double-top pattern, but euro bears should wait for confirmation. Specifically, a move lower and a subsequent break of the 1.0523 area, the neckline of the pattern, is needed in order to validate this structure.
Euro bears would love some support from the momentum indicators to stage such a move, but the Average Directional Movement Index (ADX) and RSI do not seem eager to help. The former shows a mildly trending market and the latter is comfortably sitting above its 50-threshold area. Interestingly, the RSI appears to be somewhat toppy, which matches the stochastic oscillator at this stage. This indicator has been hovering at its overbought (OB) territory for the past two weeks, showing some early signs of rally exhaustion.
For the euro bears’ wish to come true, they need a strong signal from both the RSI and stochastic. Should this occur, euro bears would face support at the March 15, 2023 upward sloping trendline before they come up against the busy 1.0711-1.0745 area. This is defined by the 50- and 100-day simple moving averages (SMAs), the 23.6% Fibonacci retracement of September 28, 2022 – April 14, 2023 uptrend and the December 15, 2022 high. Breaking this range is crucial for short-term momentum.
On the other hand, the bulls could try to retest the 1.1075 high on April 14, 2023. If successful, the March 31, 2022 high of 1.1184 appears to be the next target, with the path then clear until the 1.1400 area.
To conclude, EURUSD made a one-year high, but euro bulls potentially want more. However, the bears are already eyeing the bearish double-top pattern forming and are anticipating the appropriate signal from the momentum indicators to stage the move lower.