The euro currency tested towards the 1.1900 level against the US dollar as the FOMC policy meeting appeared to be negative for the greenback due to the FED’s lack of concern about inflation and urgency to act on tapering.
This week further gains are possible for the EURUSD pair, however, due to a summer lull in the foreign exchange market, the prospect of tight ranges until traders fully to return to their desks in September are high, so we could also see range bound activity between the 1.1800 and 1.1900 levels.
Low volume and trading liquidity is often a curse during the summer months, and with this said buying the lower end of the short-term range and selling the top of the appears to be a good play.
In the near-term, the EURUSD is still showing signs that higher highs and higher lows may be the new dynamic to watch, and an upside breakout will eventually happen in the autumn months.
Additionally, significant amounts of bullish price divergence are still present towards the 1.1975 level, which leads me to be believe that buying dips back to the 1.1800 support area is probably the number one trading strategy for the EURSD.
In terms of current sentiment, the ActivTrader market sentiment tool shows that sentiment remains largely neutralized. This is a good sign for range traders, and even scalpers.
The ActivTrader market sentiment tool shows that bullish sentiment is now at 53 percent, marking a 1 percent rise since last week. If the herd starts to actually turn bearish watch out for a EURUSD rally.
EURUSD Short-Term Technical Analysis
The EURUSD pair continues to show that a breakout from a large falling wedge pattern has happened, with the upside projection of the wedge break around the 1.1975 to 1.2000 level.
To the downside, a break under the 1.1790 level this week could see the EURUSD pair breaking down, however, I currently favour buying dips towards the 1.1830 to 1.1810 area in expectation of a counter rally towards the 1.1975 level.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, significant amount of bullish RSI, MACD price divergence has formed and continued to project a coming rebound above the 1.1975 level.
It is noteworthy that the EURUSD pair will form a large bullish reversal pattern if the price reaches the 1.1975 level. The pattern could hold an upside projection of around 200 points.