On the daily chart below, we can see that we have a strong downtrend in the EURUSD pair. The possible major double top at the 1.1033 high has the neckline at the 1.0533 level, which is at the moment the target for the sellers. The price is now stalling at a key support level at the 1.07 handle though and we may get a bounce first before another selloff later on.
The moving averages are clearly pointing downwards, and we can see that on the daily chart the sellers always leant on the blue 8 period moving average , which generally happens in strong trends only. Another thing to be aware of is that the two tops diverged with the MACD which makes the double top pattern more reliable.
EURUSD Technical Analysis
On the 4 hour chart below, we can see that EURUSD has been trading within a falling channel with clean lower lows and lower highs. The 1.07 handle support is also the bottom of the previous divergent rising channel. Recall, we highlighted this support as a target for the sellers because that’s generally the target on channels’ breaks and in fact we got a selloff right into this level.
What we can notice now though is that EURUSD has been diverging with the MACD falling into the 1.07 support, which is a signal of a weakening momentum often followed by pullbacks or reversals.
In this case, if we get a pullback, the target for the buyers should be the 1.08 handle with the 1.0845 resistance being the last line of defence for the sellers as that’s the spot where we will have the 38.2% Fibonacci retracement level and the daily red 21 period moving average for confluence. Should be a tough nut to crack if the bearish bias remains intact.
On the 1 hour chart below, we can see that we have a descending triangle pattern formed right at the support level. Generally, when the price breaks on either side of the triangle what follows is a strong move into the breakout direction. If we get a breakout to the downside, the sellers should extend the fall into the 1.0670 price zone first and target the lower bound of the channel next.
If we get a breakout to the upside, then we should see a bigger pullback in EURUSD with the 1.08 handle being the target for the buyers. Given that fundamentally the market has already basically priced in the hike in June and July, it may be better to wait for more data to confirm the next move and not getting caught in fakeouts. The US NFP report is the highlight of this week.
