The euro is still looking extremely bullish against the US dollar due to the strong technical close on the week and also developments surrounding the US dollar.
Last week the US dollar index suffered one of its biggest drubbings on the currency markets in years, which caused the EURUSD to trade towards the 1.0900 handle.
As you see by the attached price chart, such was the magnitude of the sell-off in the US dollar index that a bearish death-cross is currently underway.
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Due to the fact that the euro has the largest weighting inside the DXY basket of currencies it is likely that if the US dollar technical down move continues, we are likely to see EURUSD strength.
I would expect that the pair could eventually headed down towards 1.1000 level and then possibly as high as the 1.1500 level.
The ActivTrader Sentiment tool suggests that 85% of traders are bearish on the EURUSD. This is still very worrying if we consider that traders are still selling despite the latest price ramp this week.
As traders, we typically look to fade retail sentiment when it is overly skewed in one direction. This style of trading, fading sentiment, has been one of the most effective and used tactics of hedge funds.
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The EURUSD is currently showing a large amount of negative MACD price divergence has formed. The size of the divergence would indicate that a short-term bottom and a coming correction towards the 1.0650 area.
This is a not worrying chart for the EURUSD over the short-term for bulls. This bearish divergence is actually projecting a move of around 200 points. Considering how far the euro is up on the year it would be a normal correction.
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According to the daily time frame, the pair has broken above a large, inverted head and shoulders pattern, which has projection for the EURUSD of around 1000 points.
As long as the EURUSD pair stays above the 1.0800 price level then medium-term analysis shows that further strength towards 1.1500 is possible.
