EURO, EUR/USD, US DOLLAR – TALKING POINTS
- EUR/USD has given up gains this week as support waivers in the range
- The Euro appears set to test the recent low as technical signals turn
- With momentum building, is there a breakout unfolding for EUR/USD?
EUR/USD TECHNICAL OUTLOOK
EUR/USD has collapsed to start this week and broken below several levels. Notably, it is now trading below the 10- and 21-day simple moving average (SMA) and moved below an ascending trend line.
The 10-day SMA is poised to move below the 21-day SMA which would be a short term Death Cross. Technical traders typically look for wider gap in the tenure of the SMAs for a Death Cross, but here it is potentially confirming bearish momentum.
The 55- and 100-day SMAs are above the price. A bearish triple moving average (TMA) formation requires the price to be below the short term SMA, the latter to be below the medium-term SMA and the medium-term SMA to be below the long term SMA. All SMAs also need to have a negative gradient.
While using either of the 10- or 21-day SMAs as the short-term SMA would fulfil the criteria for a TMA, the correct order at the short-end ensures uniformity.
The price is currently questioning the previous low of 1.0891 and a move below there could see a test of the 2-year low at 1.0806.
The rally last week stalled just below the 55-day SMA and that high of 1.1185 might be in a zone of resistance. There is a descending trend line, currently dissecting at 1.1145, as well as the 55 and 100-day SMAs.
The rejection of the rally was confirmed by a Bearish Engulfing Candle.
Further resistance could be at the previous highs and pivot points of 1.1274, 1.1280, 1.1375, 1.1396, 1.1483 and 1.1495.
The upper band of the 21-day simple moving average (SMA) based Bollinger Band coincides with a potential resistance level of 1.1138.
The move back to the middle of the 1-month range has seen volatility decrease, as illustrated by the narrowing of the Bollinger Bands. A breakout of the 1.0806 – 1.1185 range could see an increase in volatility.