EUR/USD Rate Trades In Descending Channel, RSI Retains Bearish Trend

With that said, the decline from the January high (1.2350) may turn out to be a correction in the broader trend rather than a change in EUR/USD behavior as the crowding behavior from 2020 resurfaces, and the exchange rate may continue to trade within a descending channel as long as the Relative Strength Index (RSI) tracks the downward trend established in December.

EUR/USD RATE DAILY CHART

Image of EUR/USD rate daily chart

Source: Trading View

  • Keep in mind, the EUR/USD correction from the September high (1.2011) proved to be an exhaustion in the bullish price action rather than a change in trend following the string of failed attempts to close below the 1.1600 (61.8% expansion) to 1.1640 (23.6% expansion) region, with the Relative Strength Index (RSI) highlighting a similar dynamic as it broke out of the downward trend carried over from the end of July to recover from its lowest readings since March.
  • The break/close above the 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion) region pushed EUR/USD to a fresh yearly highs throughout December, with the exchange rate taking out the 2020 high (1.2310) during the first week of January.
  • However, EUR/USD has snapped the opening range for 2021 following the failed attempt to test the April 2018 high (1.2414), with the exchange rate still susceptible to a larger pullback as the RSI continues to track the downward trend established in December.
  • EUR/USD appears to be trading within a descending channel following the break of the January range, but need a close below the 1.1960 (61.8% expansion) to 1.1970 (23.6% expansion) region to bring the 1.1920 (78.6% expansion) area on the radar.
  • Next area of interest comes in around 1.1810 (50% expansion) to 1.1860 (61.8% expansion) followed by the 1.1760 (38.2% expansion) region.
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