EURUSD maintains the strong bullish phase that took place in the final week of June. The pair paused its rally after reaching its highest level since early May 2016 at 1.1444 on June 29. The 50-day moving average is still heading north after a bullish crossover that took place on May 22 at 1.0816.
Following the strong upside move last week, the market reached overbought conditions, as indicated by the RSI. It is currently showing that momentum has retreated slightly below 70 but is within sight of overbought territory. The fading upside momentum suggests that a consolidation phase is likely for EURUSD in the short term. A move back below 1.1130 would indicate that the short-term bullish phase has ended.
Any upside moves would target 1.1615, the high from May 2016. A break of this major resistance level would open the way towards the August 2015 high at 1.1713.
Since the market is quite overextended, a pullback is possible. In this case, support is located around 1.1280. This level has acted as a resistance area in the past and is thus considered to be an important level to the downside. Below this, the levels at 1.1130 and 1.1015 are expected to provide support. Finally, the level at 1.0816 is important support since it converges with the 200-day MA.
After such a sharp rally in recent days, EURUSD is likely to take a breather, providing more risk to the downside than to the upside in the near term. But looking at the bigger picture, the uptrend that started from the January 3 low at 1.0340 to the June 29 high of 1.1444 is still intact. Trend indicators are giving a bullish market structure, as prices are above the daily Ichimoku cloud and there was a bullish crossover of the 50-day MA with the 200-day MA. Meanwhile, the 50-day MA is still rising.