has been in a recovery mode since yesterday, when it hit support near the 1.3675 area. That said, the rate is now trading slightly below 1.3800, the lower end of the sideways range that contained the price action from Feb. 26 until this Tuesday. In our view, as long as it stays below that area, there are decent chances for the bears to take charge again.
If the bears are willing to reenter the game near the 1.3800 zone, we would expect them to push the action down for another test near the 1.3675 territory. A break lower would confirm a forthcoming lower low on both the 4-hour and daily charts and may see scope for extensions towards the 1.3565 zone, defined as a support by the low of Feb. 4.
Looking at our short-term oscillators, we see that the RSI, although fractionally above 50, has turned down again. It could fall back below 50 soon. The MACD is negative, but above its trigger line. Although the MACD suggests that there may be some more recovery in the works, the fact that the RSI turned down near its 50 line points otherwise. Bearing in mind that the RSI is a faster indicator than the MACD, we see the case for the latter to also start topping soon.
In order to abandon the bearish case, we would like to see the recovery continuing above the 1.3820 level, which is marked by Monday’s inside swing low. This could confirm the rate’s return within the aforementioned range and may encourage advances towards Monday’s high of 1.3875. If the bulls are strong enough to overcome that zone as well, then we could see extensions towards the 1.3960 zone, or the psychological area of 1.4000, which is also the upper bound of the pre-discussed sideways range.
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