EURUSD H4: Bears ready to pounce if Bulls fail to breach key resistance

January 18, 2023

The EURUSD on the H4 time frame was in an uptrend until 16 January when a last higher top was recorded at 1.08735.

A closer look at the Momentum Oscillator reveals negative divergence between point “a” and “b” when comparing the tops at 1.08671 and 1.08735. This could have alerted technically inclined traders that the bullish trend might lose power.

After the higher top at 1.08735, the price dropped through the 15 and 34 Simple Moving Averages and the Momentum Oscillator followed by moving into bearish territory.

A possible critical support level formed when a lower bottom was recorded on 18 January at 1.07654. The bulls are currently trying to drive the price higher.

If the price of EURUSD breaks through the critical support level at 1.07654, then three possible price targets may be projected from there.

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Attaching the Fibonacci tool to the lower bottom at 1.07654 and dragging it to near a resistance level that was created on 17 January at 1.08734, the following targets may be anticipated:

The first target can be estimated at 1.06987 (161.8%).
The second price target may be calculated at 1.05907 (261.8%).
The third and final target can be expected at 1.04160 (423.6%).

If the resistance level at 1.08734 is broken, the above scenario must be re-examined.

After all, this could be a case of Euro bulls consolidating around 1.087, before mustering enough mass to punch past the immediate resistance levels that had thwarted EURUSD’s upside since last week.

As long as the bears continue their negative mindset and supply continues overcoming demand, the outlook for the EURUSD currency pair will remain bearish.

Article by ForexTime