EUR/NOK traded higher today, breaking above the 10.930 barrier. However, the recovery was stopped by the upper bound of a falling wedge that’s been containing the price action since April 22nd. As long as the rate stays within that formation, we would adopt a neutral stance. We would like to see a break above the upper end before we get confident on larger advances.
If indeed the bulls manage to overcome the crossroads of that boundary and the 11.020 level, they may get encouraged to drive the battle towards the high of May 15th, at 11.110. If the advance doesn’t stop there, the rate could climb towards the 11.180 hurdle, marked by the high of May 12th. Another break, above 11.180 is likely to set the stage for extensions towards the 11.250 barrier, near the inside swing low of May 4th.
Shifting attention to our short-term oscillators, we see that the RSI lies above 50, while the MACD, although negative, lies above its trigger line and appears ready to obtain a positive sign soon. What’s more, there is positive divergence between the price action and the RSI. All these signals suggest that the rate may start picking up upside speed soon, which increases the chances of an upside exit out of the falling wedge. That said, the RSI has just ticked down, and thus, we would stay careful of potentially some further retreat before the next positive leg.
Having said all that though, in order to start examining the bearish case, we would like to see a clear dip below 10.860, which has been providing support since Tuesday. Such a move would confirm a forthcoming lower low and may initially target the 10.790 level, where another break could allow the bears to put the 10.720 hurdle on their radars. That level marks the low of March 10th.
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