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EUR/USD Price Analysis: Bull divergence of RSI seen on 4H chart

  • EUR/USD's 4-hour chart RSI is reporting early signs of bullish reversal. 
  • So far, the single currency has struggled to draw bids and has traded on the defensive below 1.08.

The key indicator has diverged in favor of the bulls, but so far, that has failed to draw bids for the EUR/USD pair. 

The 4-hour chart relative strength index (RSI) has produced consecutive higher lows, contradicting lower lows on price over the last ten days. The bullish divergence often marks the end of the downtrend. As a result, it is widely considered an early warning of a bearish-to-bullish trend change. 

So far, however, we have not seen evidence of fresh chart-driven buying. The spot remains on the defense under 1.08 with the daily chart reporting a bearish continuation pattern – Thursday's bearish engulfing candle reinforced the downward bias. 

As a result, a drop to the psychological support at 1.0750 cannot be ruled out. On the higher side, a move above Thursday's high of 1.0821 would validate the bullish RSI divergence on the 4-hour chart and could yield a stronger corrective bounce to 1.0850.

4-hour chart

Trend: Neutral-to-bearish

Technical levels

 

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