The EUR/USD pair bullish run continues, as it did for the entire month of April and May so far. However, with only a few trading days left in the month, some bearish signs call for caution.
Most notably, the pair formed a double bearish divergence. Truth be said, as traders know, the market may remain in a divergent mode more than traders may remain solvent. However, one may choose to wait for the market to speak first and act only after. In other words, wait for a so-called proof of life, before shorting the pair. In the meantime, caution is needed for more upside due to a huge divergence with the RSI.
Yesterday, the head of the Bank of France and a member of the ECB’s Governing council, Villeroy de Galhau, hinted that the ECB might end up being more patient with the tapering than even the Fed. Yet, the market did not react.
Also, Fed members recently have increasingly talked about tapering, but the market still did not react. The risk here is that we will see some aggressive movement into the end of the trading month, and, if it comes, trades should be ready.
EUR/USD Technical Analysis
Aggressive bulls may want to sell the market short with a stop at 1.2350 and a take profit at 1.20. However, the wiser thing to do is to wait for a move below 1.2150 before going short with a stop at the highs and a take-profit set by respecting a 1:3 risk-reward ratio.