EUR/USD Price Analysis: Ascending Triangle favors a volatility contraction

• EUR/USD is aiming to stretch its recovery move above 1.0840 as investors’ risk-taking capacity is improving.
• The formation of an Ascending Triangle chart pattern indicates a volatility contraction.
• The Euro may continue to find support from the 200-EMA ahead.

The EUR/USD pair is on the verge of surpassing the immediate resistance of 1.0840 in the Asian session. The major currency pair is looking to extend its recovery move as the US Dollar Index (DXY) has dropped to near 101.60.

Positive market sentiment is gaining traction as the S&P500 futures are displaying decent recovery signals after a three-day losing spell. Also, the 10-year US Treasury yields have crossed 3.40% after a hawkish commentary from New York Federal Reserve (Fed) Bank President John Williams as the policymaker sees a continuation of interest rates hikes as the road to 2% inflation is far from over.

EUR/USD has rebounded after sensing buying interest around the upward-sloping trendline of the Ascending Triangle chart pattern plotted from January 10 low at 1.0712 on an hourly scale. The horizontal resistance of the aforementioned chart pattern is placed from January 12 high at 1.0867. The chart pattern indicates volatility contraction and awaits a potential trigger for an explosion.

The 200-period Exponential Moving Average (EMA) at 1.0780 is acting as a major support for the Euro.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates a consolidation ahead.

An explosive move above January 18 high at 1.0888 will trigger a breakout of the Ascending Triangle, which will drive the major currency pair for a fresh nine-month high above April 21 high at 1.0936 followed by the psychological resistance at 1.1000.

On the flip side, a decisive break below January 13 low at 1.0780 will drag the asset towards January 12 low at 1.0731. A slippage below the latter will expose the asset for more downside towards the round-level support at 1.0700.

EUR/USD hourly chart