“The weak momentum profile is not suggestive of a strong bull.” Weekly momentum is just as telling. The most recent top is accompanied by RSI divergence with RSI < 60. This is exceptionally bearish. A similar RSI pattern occurred in July 2008. If the rate does trade to a new high, then a drop back into the range would be required in order to create a trade-able high (complete an ending diagonal from 1.3294 highlighted).
It’s worth mentioning that important tops have formed in April/May in recent years. A 1.3750 break would ‘announce’ that a downtrend has commenced.
EUR/USD made a new high and the sharp reversal supports the ending diagonal (wedge) interpretation. Diagonals are often fully retraced (sometimes quickly), which yields a target of 1.3294. Recent developments put to rest the idea that EUR/USD has broken the line that extends off of the 2008 and 2011 highs. Rather, a failed breakout and top would keep with the pattern of 3 year cycle tops. 1.3750 is an important reference point (year open) but 1.3722 is now important to the integrity of the near term downtrend.
Near term, EUR/USD has bounced from the top of a well-defined 1.3560/90 support zone. Friday’s rally stalled at former support (5/15 low) but respect potential for a bigger bounce next week.
Read more here: EUR/USD 31/05/2014