Early in the American session, EUR/USD is trading around 1.0945, around the 21 SMA, below the 200 SMA located at 1.0967, and inside the downtrend channel formed since December 27th.
In the 1-hour chart above, we can see that in recent negotiations, EUR/USD has been under a bearish consolidation formed by a small secondary channel. A sharp break above this channel and a consequent consolidation could generate a positive outlook which could be seen as a signal to buy with the targets at 1.0970 (top of the bearish channel) and 1.0986 (6/8 Murray). If the channel is broken at 6/8 Murray, the price could reach 1.1108.
In case the euro falls below 1.0944, we could expect the consolidation to continue and EUR/USD could trade within the secondary channel, but if there is a break below this channel, we could expect the instrument to reach 5/8 Murray located at 1.0864. EUR/USD could even reach the bottom of the downtrend channel around 1.0816.
The market sentiment report shows that there are 52.09% of traders who are selling the euro. Technically, this could mean that the euro could continue to strengthen in the coming days. This outlook is based on the opposite of what the market thinks. Therefore, we could continue buying the euro if it consolidates above 1.0945.
On January 5, the euro reached an extremely overbought zone, but since then, we have observed a recovery in trading volume which could give rise to a new bullish momentum for the euro. We could take advantage of this, only if the price breaks above 1.0945 for buy in the short term with the target at 1.1108.
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