Last week we noted that EURUSD showed some reversal signals to the upside. The bullish RSI divergence signals together with the fact that price broke out of the short-term bearish channel, made us expect a strong bounce higher towards 1.1440. However price has not followed this path, instead it only managed to make a high at 1.1383 and it is mostly moving sideways since then.
EURUSD Is currently testing the short-term support trend line as shown in the 4 hour chart above. Price is making lower highs but no lower lows. At least not yet. By breaking below the blue trend line, chances for a move below 1.1220 increase dramatically. Bulls so far have not shown any sign of strength. As we have mentioned many times before, the bullish divergence in the RSI is only a warning and not a reversal signal. If price does not follow the bullish divergence by breaking above resistance levels, then the more time it takes to react, the higher the chances the RSI divergence will eventually get cancelled. So unless we see a strong upward move by bulls and a break above 1.1325, we should expect price to continue lower towards 1.12 and below.