EURUSD has held support at the 61.8% Fibonacci retracement of the rise from 1.1990 to 1.2180. This was an important win for bulls. Only a break below 1.2050-1.2060 could make bulls lose control of the short-term trend. With price now moving higher, bulls are confident that if resistance at 1.2180 is broken, we could see a higher high towards 1.2250.
Blue lines -Fibonacci retracements
Support is at 1.2050-1.2060. As long as price is above this level we expect to see a move towards 1.22 and higher. However traders need to be cautious even if price breaks above 1.2180. Why is that? In the Daily chart we already have seen one bearish divergence. A higher high could provide a new divergence warning.
Red lines – bearish divergence
EURUSD has the potential to make a new higher high as price is making higher lows. If however this higher high is followed by a lower high in the RSI, then we will have another warning signal that should not be ignored. Usually such formations are followed by trend reversals. So we need to keep a close eye on the RSI as EURUSD climbs higher. 1.2060 remains our key and trend change level.