The Extended bullish divergence usually comes in a trending market. After a strong fall and set a temporary bottom. But because of the lack of bullish momentum. The pair usually extends its weakness below support level to get the necessary momentum.
In our case, according to daily %R – Williams. The pair put a temporary bottom at 1.3058 levels after forming a bullish divergence. But because of the lack of bullish momentum. The pair extended its weakness yesterday beneath 1.3058 to get the necessary momentum to try rising again.
The extended bullish divergence is bearish in short-term and bullish in the long term. But sometimes in the strong trending market. It continues to extend its weakness and it may dip 500-1000 pips before the next rise.
There are some points that must be put in mind:
1- Next bottom is likely to be somewhere around 1.2960, 1.2840 and 1.2700, any sign of bottoming on the daily chart, would bring rebound to the upside towards 1.3058/1.3145 levels.
2- Resistance is at 1.3058 ahead of 1.3145, those levels are likely to contain any rise so, If the pair is rejected from 1.3058/1.3145, a lower leg below the most recent support is strongly suggested before the next rise.
3- Stability above 1.3058/1.3145 levels on a daily closing basis, will confirm short term bottoming and the pair will try higher towards 1.3320/1.3415 levels.
In the long-term picture, as long as 1.2661 /1.2745 holds, the pair will fly towards 1.4200 levels, losing 1.2661 would weaken this view, and pave the way towards 1.2000 levels.