In today's technical analysis, we turn our attention to EUR/USD, which is currently testing two pivotal resistance levels. The first is the yellow horizontal resistance, and the second is the black downtrend line—both of which are crucial in determining the pair's next significant move.
Current Scenario
The initial contact with these resistance levels has resulted in a negative reaction, as sellers have stepped in to defend their positions. However, the market remains undecided, and the next one or two trading sessions will likely determine the pair's medium-term direction.
Possible Scenarios
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Bearish Reversal:
If the price bounces off these two resistance levels, it would confirm sellers' dominance and generate a strong sell signal, potentially leading EUR/USD to retest lower support levels.
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Bullish Breakout:
Should the price manage to break above both the yellow resistance and the black downtrend line, it would signal a potential shift in momentum, providing a compelling buy signal. However, given the overall long-term bearish trend, traders must remain cautious of a false bullish breakout, where the price briefly rises above resistance before reversing back below.
Sentiment and Caution
The prevailing trend on EUR/USD remains negative, with bears firmly in control for the longer term. Therefore, even if an upside breakout occurs, traders should wait for confirmation—a decisive close above the resistance levels—before committing to long positions. Conversely, a confirmed rejection at the current levels would align with the broader bearish sentiment, favoring short trades.