The test of the median channel trendline of the descending channel starting Sep 24, 2018, increased short bets.
Naturally, above the $1.10 round level, investors sold euros in an attempt to take profits that have been running since the March’s lows of 1.0635.
Price action has been somewhat bullish as it has been trading within an ascending channel since the aforementioned lows. Despite that, the take-profit driven pullback will most probably have eurodollar traders taking action at lower levels.
The near-term price action suggests that EURUSD is more bearish than bullish following the false break above 1.10. This is also supported by the rejection of bullish bets at the median channel trendline of the ascending channel starting at 1.0635.
When looking at the short-term outlook below, we can also notice a short-term descending channel (red channel) that signals more downside.
The 1.09 level is the first strong interaction level between prices and the longer-term median trendline of the Feb 15, 2018 descending channel.
With prices falling closer to 1.09, the RSI could finally form a hidden bullish divergence. This would suggest a bounce and a potential move towards 1.10. Or, perhaps, even higher given the descending channel breaks.
A failed or weak divergence, on the other hand, would spell declines beyond the 1.09 level. The first intersection at the median trendline of the short-term descending channel would then start Mar 27, 2020.
A successful break of the said level could let prices fall at the bottom of the ascending channel below 1.08. They could even slide lower, intersecting with the bottom of the descending channel below 1.065.