EUR/USD has decreased as deep as 1.0827, but now it seems a little oversold according to the H4 chart. The outlook is bearish despite a minor rebound, the price could come back to test and retest the near-term resistance levels. Support turned into resistance before it resumes the downside movement.
EUR/USD plunged while the dollar index has climbed higher. I've said in the previous analysis that the dollar could drive the pair towards new lows if the USDX maintains strength. USDX is trading at 99.13 level, above the 98.91 static support. It could still try to approach and reach the 99.37 static resistance on the short term.
If the USDX jumps higher in the upcoming hours, EUR/USD could reach the next downside obstacle represented by the 150% Fibonacci line of the minor descending pitchfork. The pair is trading right below the S2 level (1.0841), it could drop further if it stays below this level.
The bias is bearish as the price is located much below the minor downtrend line. EUR/USD has registered an impressive drop after retesting 1.1084 and after the failure to retest the upper median line (uml) of the descending pitchfork.
EUR/USD has ignored the 1.0879 static support and also the lower median line (lml), so the price remains under massive selling pressure as long as it is traded below these levels and below the downtrend line.
- Trading Tips
Personally, I'm expecting the price to come back to reach the lower median line (lml) of the descending pitchfork after the current drop. However, the next downside target is seen at 150% Fibonacci lin. A valid breakdown below it will send the price towards the first warning line (wl1).
It's too early to talk about a potential reversal of EUR/USD. Indeed, only a reversal pattern like a pin bar, bullish engulfing or another pattern could signal an important rebound from this point. A fasle breakdown below the S2 (1.0841) level could signal that the downside movement is complete.
Stochastic is oversold on the H4 chart, on the H1 it shows a bullish divergence, but as I've said higher, you should be careful because the price could drop anytime as the eurozone and the US data could bring volatility today.
If the US Retail Sales, Capacity Utilization Rate, Industrial Production, and the Prelim UoM Consumer Sentiment come in better than expected, EUR/USD should reach fresh new lows till the end of the day. The German Prelim GDP, the eurozone GDP, and the Trade Balance data could shake the pair soon. I believe that some poor US data and better eurozone figures could push EUR/USD higher on the short term.
The material has been provided by InstaForex Company - www.instaforex.com