EUR/USD Mid-Day Technical Outlook – Expanded Analysis
Original Article by ActionForex.com
The EUR/USD pair experienced accelerated losses during today’s European trading session, falling through key support levels and confirming a near-term bearish reversal. The momentum seen on the downside signals growing pressure on the euro as bearish sentiment strengthens across short and medium-term charts. Spot price movement and relevant indicators suggest further declines could be on the horizon, unless critical support levels cushion the ongoing downtrend.
Key Developments and Price Movement:
– EUR/USD fell sharply, breaking below 1.0804 support, marking a structural shift in the recent uptrend.
– The break of this support zone confirms a short-term topping pattern formed around the 1.0915 level.
– The downside acceleration has exposed the next projected support at 1.0723, with deeper downside risk toward the 1.0600 handle if selling continues.
– Immediate resistance now lies near the previous support at 1.0804. Traders will closely monitor this level for potential retests and validation of trend continuation.
Technical Indicators and Momentum Outlook:
– The daily Relative Strength Index (RSI) is now pushing lower but remains above oversold territory, indicating ample room for further downside.
– MACD (Moving Average Convergence Divergence) on the 4-hour chart is firmly below its signal line, reinforcing the bearish signal and suggesting continued downside momentum.
– A bearish signal has also been confirmed on the daily chart through an emerging crossover on the MACD histogram, pointing toward declining bullish strength.
– The 20-period Exponential Moving Average (EMA) on the 4-hour chart has turned downward and now acts as dynamic resistance. Price has also moved below the 50-period EMA, adding to the pessimistic short-term bias.
Support and Resistance Levels to Watch:
– Immediate resistance:
– 1.0804 (prior support turned resistance)
– 1.0850 (psychological resistance and minor swing high)
– Current support:
– 1.0723 (near-term support, minor swing low from earlier move)
– 1.0694 (38.2% Fibonacci retracement of the entire March-to-June rally)
– 1.0600 (psychological level and possible deeper correction target)
Market Structure and Trend Analysis:
The price structure in recent sessions shows a clear departure from the bullish momentum seen in April and early May. After topping at 1.0915, EUR/USD began forming lower highs and lower lows, pointing to a shift in market sentiment. The breach of 1.0804 represents validation of this shift, suggesting that the latest rally was corrective within a broader downtrend phase.
Moreover, the pair has broken below a potential trendline dating back to March lows, further undermining the bulls’ position. The bearish trend now appears structurally supported, unless a strong reversal occurs above the 1.0850 level.
Fundamental Background:
Two primary drivers are contributing to current euro weakness and dollar resilience:
1. Divergences in Monetary Policy Expectations:
– The Federal Reserve continues to signal a cautious stance on rate cuts, emphasizing data dependence and inflation persistence. This has pushed two-year U.S. Treasury yields higher and supported the dollar.
– In contrast, the European Central Bank (ECB) is seen as more inclined toward rate easing amid softer economic growth trends, especially in Germany and Italy. ECB policymakers have made dovish remarks recently, reinforcing the market’s expectations for rate cuts over the coming quarters.
2. Risk Sentiment Shifts and Safe Haven Appeal:
– Global risk sentiment has softened amid concerns over China’s growth outlook, ongoing geopolitical tensions, and uncertainty around U.S. future data releases.
– The U.S. dollar has regained appeal as a safe haven asset, supported by comparatively higher interest rates and economic resilience. This backdrop continues to weigh on EUR/USD and other risk-sensitive assets.
Outlook and Scenarios
Read more on EUR/USD trading.