The EUR/USD pair edged lower on Friday, trading around 1.0500 during the Asian session, after a period of gains in the previous day. A closer look at the daily chart suggests a potential bearish reversal, as the pair continues to trade within a rising wedge pattern. This technical formation, characterized by declining volume, signals weakening buying pressure as the pattern develops.
Despite this, the 14-day Relative Strength Index (RSI), a key momentum indicator, remains near 60, suggesting that bullish sentiment still supports the pair. A move above the 70 threshold could indicate overbought conditions, raising the possibility of a downward correction. The pair also remains above both the nine-day and 14-day Exponential Moving Averages (EMAs), which continue to provide short-term support.
On the upside, the EUR/USD faces initial resistance at the upper boundary of the rising wedge around 1.0540. A breakout above this level would reinforce the bullish outlook and open the path for a test of the two-month high at 1.0630, which was reached on December 6.
However, if the pair starts to weaken, key support levels come into play. The first is the nine-day EMA at 1.0453, followed by the 14-day EMA at 1.0436, which coincides with the lower boundary of the rising wedge. A decisive break below this support zone could trigger a bearish shift, potentially pushing the pair toward the 1.0177 level, marking the lowest point since November 2022, last seen on January 1.
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