As we noted in our previous review of this pair, until the ECB takes concrete steps toward tightening its policy, the euro will remain under strong pressure, and the EUR/USD pair is under threat of a new fall below 1.0500, towards euro parity with the dollar.
Our forecast came true: last week the price broke through the 1.0500 mark, and EUR/USD reached a local multi-year low near the 1.0350 mark. The lower limit of the descending channel on the weekly chart also passes through this mark at the moment.
EUR/USD is declining not only due to the weak euro, but also to the strengthening dollar. In terms of technical analysis, a strong negative momentum prevails. In particular, the Stochastic on the monthly and weekly charts of the pair has been in the oversold zone for a long time, not wanting to get out of there, which indicates a strong bearish trend.
At the same time, it is worth paying attention to the 4-hour and 1-hour EUR/USD charts, where the OsMA and Stochastic indicators turned to long positions, signaling an upward correction.
Given the strong negative momentum, the final targets of this correction are located, in our opinion, near 1.0485 (lows of the downward wave from the level of 1.3870, which began in May 2014, to 1.0500 and the 0% Fibonacci retracement level), and 1.0500. An important short-term resistance level (200 EMA on the 1-hour chart) is also located in the zone of these marks.
In an alternative scenario, the price will break through this resistance level, and the upward correction will continue to the resistance levels of 1.0640 (local resistance level), and 1.0696 (200 EMA on the 4-hour chart).
In the main scenario, one should expect a decrease in EUR/USD from current levels. The first signal for the resumption of short positions will be a breakdown of the local support level 1.0388, and the confirming one—the level of 1.0350.
A very volatile trading day is expected tomorrow, primarily for the dollar and the euro. Time markers in EUR/USD trading positions: 12:30, 17:00, 18:00 (GMT).
Support levels: 1.0388, 1.0350, 1.0300
Resistance levels: 1.0485, 1.0500, 1.0600, 1.0640, 1.0700, 1.0780, 1.0800, 1.1000, 1.1110, 1.1220, 1.1285
Trading Tips
Sell Stop 1.0380. Stop-Loss 1.0450. Take-Profit 1.0350, 1.0300, 1.0200, 1.0100, 1.000
Buy Stop 1.0450. Stop-Loss 1.0380. Take-Profit 1.0485, 1.0500, 1.0600, 1.0640, 1.0700, 1.0780, 1.0800, 1.1000, 1.1110, 1.1220, 1.1285