I am using Renko to analyze the current price action of the EURUSD pair. Renko very clearly shows the price action by reducing the ‘noise’ that Japanese candlesticks can often cause in a consolidating market. We can easily observe that we are forming a wedge on the chart. The consistent series of lower highs and higher lows has been a continued trend since the beginning of the year. The key identifier for a breakout at this level will be where the oscillator levels are in relation to the location of price near these wedge lines.
I think it is important to observe the behavior of the RSI and price when the price is near the upper or lower band: prices reverse if the oscillator is near an overbought or oversold condition. However, the end of the trading day on Friday showed price coming closer to the bottom wedge line, but RSI was not exhibiting an oversold condition. Neither was it oversold. Due to the nature and behavior of this bottom wedge line, we can expect the price to bounce from this area, but the bounce should be limited. There is more weakness to higher prices than there is to lower prices. A break of the wedge should be expected during the next trading week, if there is not a break, expect a continued range trade between the two wedge lines.