EUR/USD Technical: Bears may be getting exhausted

  • The current minor downtrend phase for EUR/USD from its 3 May 2023 high of 1.1092 is showing signs of exhaustion.
  • Elliot Wave/fractal analysis suggests a potential terminal support zone of 1.0670/1.0630 for the minor downtrend phase where a possible minor mean reversion rebound may occur next.
  • The key intermediate resistances to watch will be at 1.0725 and 1.0850.

Fig 1: EUR/USD trend as of 30 May 2023 (Source: TradingView, click to enlarge chart)

In the medium term (multi-week), the price actions of EUR/USD are evolving in a downtrend phase since the bearish break down from the multi-month ascending channel support from the 28 September 2022 low 0f 0.9536 on 18 May 2023 as depicted on the daily chart.

Elliot Wave/fractal analysis suggests the current minor downtrend may be approaching its tail-end

The ongoing 390 pips decline from its 1.1095 high of 26 April 2023 (also current 52-week high) to the current intraday low of 1.0701 on 30 May 2023 has traced out an Elliot Wave/fractal analysis’s five waves down move (labelled as i, ii, iii, iv & v on the 4-hour chart) with its potential terminal level at 1.0670/1.0630 (defined by a cluster of Fibonacci extension levels).

“Descending Wedge” and bullish divergence seen in 4-hour RSI may suggest bearish momentum exhaustion

In addition, the price actions of EUR/USD since its minor swing high of 1.0831 printed on 22 May 2023 have started to evolve into an impending minor bullish “Descending Wedge” configuration coupled with a bullish divergence signal being flashed out on the 4-hour RSI oscillator at its oversold region.

These observations suggest that the ongoing minor downtrend phase from the 3 May high of 1.1092 may have started to get exhausted for EUR/USD bears and in conjunction with the potential Elliot Wave count analysis highlighted earlier, the odds seem to be skewed towards a possible minor short-term corrective mean reversion rebound to retrace a certain portion of this current minor downtrend phase.

Key short-term pivotal support at 1.0630 to maintain this potential minor mean reversion rebound scenario with next intermediate resistances at 1.0725 (the upper boundary of the minor “Descending Wedge”) and 1.0850 (former minor swing lows of 10 April/15 May 2023).

On the other hand, a break below 1.0630 exposes the key medium-term support at 1.0520 (also the 200-day moving average.

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Kelvin Wong

Kelvin Wong

Senior Market Analyst, Asia Pacific at OANDA
Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities. Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets. In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.