EUR/USD bounced back after reaching downside obstacles. The pair tries to grow as the Dollar Index has plunged. DXY challenges a confluence area. A valid breakdown signals further drops, while a false breakdown signals a potential leg higher.
The pair drops when DXY rises and it grows when the index falls. As you already know, the European Central Bank maintained its monetary policy unchanged. The Main Refinancing Rate was left at 0.00% as expected. Surprisingly or not, the EUR/USD pair has increased even though traders were disappointed by the ECB.
Also, the greenback depreciated despite better than expected US Unemployment Claims data. The indicator dropped from 345K to 310K in the last week, below 343K expected.
EUR/USD Bounce Back
EUR/USD has found support at the upper median line (UML) and at the weekly S1 (1.1804) level. Now, it has rebounded but the pressure remains high. We cannot exclude a new drop in the coming hours if DXY raises.
Making a new lower low, bearish closure below 1.1802 level may signal a further drop. On the other hand, consolidating here above the mentioned support levels could announce a new swing higher.
Trading Conclusion
EUR/USD could still increase as long as it stays within the ascending pitchfork's body and above the upper median line (UML). Coming back above the weekly pivot point (1.1856) and above the median line (ML) could signal a potential upside continuation. Technically, a larger upward movement could be confirmed only by a valid breakout through 1.1908.
The material has been provided by InstaForex Company - www.instaforex.com