EURUSD Massive Bearish Divergence Spells Troubles for Bulls

The EURUSD pair formed a massive bearish divergence with the RSI. On top of that, the price action resembles a rising wedge pattern – another bearish sign.

The Euro is one of the currencies that gained the most against the dollar during the pandemic. The market perceived the Fed as easing more than the ECB, and so the EURUSD pair rose from 1.07 to 1.23 during the pandemic. All this time, the pair traded with a bid tone, as corrections were insignificant.

Low inflation remains a problem for the ECB and the Euro. A higher EURUSD exchange rate weighs on inflation, and this threatens the ECB’s mandate of delivering inflation below but close to the 2% level.

EURUSD Technical Analysis

The technical picture speaks for itself. While clearly in a bullish trend, the pair was only able to make marginal highs. Bears may want to wait before the series of higher lows is broken before going short. At that point, it means that the price also broke the rising wedge. On such a break, it makes sense to go short with a stop-loss at the highs and a take profit at either half the distance the wedge traveled or even aim for full retracement. In both cases, the risk-reward ratio is good enough for bears to consider such a trading setup.

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EURUSD Price Forecast

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