In the American pre-market, the EUR / USD pair is trading below the strong resistance of +1/8 of murray, after having registered a new high since January at 1.2266. The pair is overbought. The EUR / USD pair still maintains the bullish force although we foresee an imminent correction in the next few hours.
The US dollar (USDX) has fallen to the level of 89.59, being strongly oversold. Besides, yields of the US benchmark 10-year Treasuries fell to 1.58%.
On the other hand, investors are concerned about rising inflation. Some Fed officials said they expect inflation spikes to be temporary. However, the US Dollar is set to weaken, so many investors will seek refuge in the Yen (USD / JPY) and Gold (XAU / USD).
In the 4-hour chart, we can see that EUR / USD has reached a level of strong resistance located at 1.2268, (+1/8 of murray). This level represents extremely overbought market conditions. It could push the pair down up to the 8/8 murray level around 1.2207.
We can also observe that the EUR / USD pair has been trading within an ascending wedge since the beginning of the month, with an uptrend channel that now remains intact. There could be a correction to the support of the bullish channel (1.2207) for a new bullish wave.
The technical reading of the eagle indicator shows that the pair is approaching overbought levels with a downward correction move likely to the 8/8 murray support and the 21 SMA zone which is also acting now as a dynamic support.
Due to a break and consolidation below this zone, the Euro may fall and initiate a downtrend reversal to the 200 EMA located at 1.2064.
Support and Resistance Levels for May 25 - 26, 2021
Resistance (3) 1.2301
Resistance (2) 1.2293
Resistance (1) 1.2261
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Support (1) 1.2235
Support (2) 1.2207
Support (3) 1.2180
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Trading tip for EUR/USD for May 25 - 26, 2021
Sell below 1.2268 (+1/8 of murray) with take profit at 1.2207 (8/8) and stop loss above 1.2298.
Buy if the price rebounds to 1.2207 (8/8 of murray) with take profit at 1.2260 (+1/8) and stop loss below 1.2170.
