Early in the European session, the Euro is trading at around 1.0033, after falling as low as 2/8 Murray around 1.0009. It is now trading below the 21 SMA and below a downtrend channel formed on the 4-hour chart, showing an oversold signal.
EUR/USD rebounded from 20-year lows around the parity zone when it hit 0.9999, the level last seen in December 2002.
The chart above shows that the sellers remain in control, although the pair is partially losing its bearish momentum amid oversold conditions. The last candles that are being formed are a signal of a bottom and a change in trend which could encourage the recovery of the Euro.
On the 4-hour chart, EUR/USD has been bouncing around the 5-point zone which represents an extremely oversold area. If the indicator breaks above 10-points, it could boost the demand for the euro and we could expect a break above 1.0098 to buy the euro in the next few hours.
As long as the pair trades below the 200 EMA around 1.0430, any bounce towards this area will be seen as an opportunity to sell the Euro.
In case of breaks above 1.05, it could be a sign of a sustainable recovery in EUR/USD, which we could expect to resume the upward movement and reach the zone of 1.10.
The recovery of the Euro is likely to occur after the ECB increases the interest rate by 0.25% scheduled for this month of July. Another increase of 0.50% is expected at its next meeting in September. This could be a signal that the Euro might recoup accumulated losses in the medium term.
For the next few hours, we can buy EUR/USD in case of a sharp break above 1.0040 with targets at 1.0098. Additionally, with a break and close on H-4 charts above the 21 SMA, we can resume buying, with targets on 4/8 Murray at 1.0253.