- EUR/USD bulls remain in the driving seat above daily support.
- Bulls can look for a continuation towards critical Fibonacci levels.
- Bears will be looking for a break of daily support for a weekly 38.2% Fibonacci retracement.
EUR/USD net longs jumped higher, building on the gains of the previous two weeks which leaves a bullish bias on the longer-term projections.
Moreover, while net positions are elevated from a historical perspective they remain well below this year’s highs.
However, it could be argued, from a technical standpoint, that the price is overextended and is due a healthy correction.
The following top-down analysis offers something for both the bulls and the bears.
Weekly charts
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Technically, the euro has not given anything back since bursting out from last year’s consolidation.
On the weekly chart, the price has not even retraced to a 38.2% Fibonacci which is usually expected following an impulse.
The price can be argued to be somewhat overextended at this juncture and we have RSI divergence:
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Daily chart
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Using the daily chart, however, there is no scope of a downside correction until the recently formed support is broken at 1.2105 and 1.2058 below that.
A close above 1.2161, the prior day’s highs, opens scope for a continuation of what would be expected to an extension of the December rally following the daily 38.2% Fibo retracement of the daily impulse.
From a monthly basis, bulls can initially target a -0.618% Fibonacci of the monthly correction’s range at 1.2267, while from the daily correction’s range, a -0.272% Fibo target comes in at 1.2211.
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