The EUR/USD pair is showing signs of a potential major long-term trend reversal. After a prolonged downtrend that began in 2008, the pair is now breaking out of a descending channel, with strong support from momentum indicators like MACD and RSI that have been flashing positive divergence for years.
EUR/USD has rallied a lot since our last analysis and seems poised for more upside.
Key Technical Observations
Bullish Signals
-
Breakout of the long-term downtrend channel:
-
Price has decisively broken above the red descending channel that has guided the pair lower for over a decade.
-
This breakout coincides with a strong bullish candle for April 2025, showing conviction and volume behind the move.
-
-
MACD positive divergence:
-
Despite lower price lows in 2015 and 2022, the MACD has been making higher lows.
-
This suggests a loss of downside momentum and foreshadowed the breakout we’re seeing now.
-
-
RSI positive divergence:
-
Similarly, RSI formed higher lows while price was forming lower lows—another sign of hidden strength building beneath the surface.
-
-
EMA structure turning bullish:
-
Price has reclaimed both the 21-month and 34-month EMAs, with potential for a bullish EMA crossover if the trend continues.
-
These EMAs previously acted as dynamic resistance, so reclaiming them is significant.
-
-
MACD line flirting with the centerline:
-
A break above the zero line would further confirm bullish momentum on the monthly timeframe.
-
Bearish Risk Factors
-
Resistance zones ahead:
-
Strong horizontal resistance exists around 1.17 and 1.23, which previously acted as support and resistance.
-
Rejection at these levels could trigger a pullback or retest of the breakout zone around 1.10–1.11.
-
-
False breakout risk:
-
If the breakout fails and monthly price closes back inside the channel, it could be a bull trap, leading to renewed selling pressure.
-
-
MACD still below zero:
-
While MACD is curling up, it remains just below the zero line. This is often a transition zone—either momentum follows through, or it rolls back over.
-
Bullish Scenario
-
A successful monthly close and consolidation above 1.11–1.12 opens the door for a run toward 1.17, with potential extension to 1.21–1.25 if momentum accelerates.
-
MACD crosses above zero and EMAs form a bullish crossover → Long-term uptrend confirmed.
Bearish Scenario
-
If price gets rejected around 1.17–1.23 or fails to hold the 1.10–1.11 breakout zone, EUR/USD could fall back toward 1.05 or even 0.98 in a worst-case scenario.
-
Bearish reversal patterns and divergence failures would invalidate the bullish breakout narrative.
Conclusion
EUR/USD is at a critical inflection point on the monthly chart. The breakout from a 15+ year downtrend combined with bullish divergences suggests the long-term bottom may be in, but follow-through is essential. Watch key levels closely as this is a make-or-break moment for the euro.
