The EUR/USD currency pair yesterday traded beneath its 20-day Simple Moving Average (SMA) of 1.1719. This predicament illustrates the depth of the bearish sentiment that’s gripped the market. As of Wednesday, the pair sits around 1.1650, not making major headway during the trading session. Market participants are trying to make sense of that uncertainty, fed in part by many outside drivers, including the continuing political noise emanating from the US.
The 20-day SMA is at 1.1719 right now, resting above the 100-day SMA (1.1666) and the 200-day SMA (1.1582). In short, this positioning begs the question of a bullish trend in the market. The flat 100-day SMA indicates that momentum is absent. Yet, the ascending 200-day SMA suggests a vigorous bullish potential if the market reverses its course. A decisive push above the 100-day SMA might pave the way for upside progress toward the 20-day SMA. This important long-term support level is at 1.1719.
Adding in the immediate dynamic resistance represented by a secondary SMA at 1.1656, and possibilities become increasingly muddled for traders. The EUR/USD is currently trading under all three moving averages, the 20, 100 and 200. This positioning underscores a persistent bearish bias that haunts many equity market pundits. Even on the 4-hour chart the bearish divergence is apparent. The bearishly aligned 20-period SMA continues to drop below the 200 and 100 SMAs.
Market sentiment is still pessimistic, with the Relative Strength Index (RSI) still flat at 42. This latter level reflects weak buying demand and points to the fact that speculative trading has fallen off a cliff the past week. With momentum hanging below its neutral line, this adds to the broader bearish build up on the currency pair.
Keep an eye out for the techy thresholds. If the EUR/USD daily closes below 200-day SMA at 1.1582, then it may see a considerable downside risk. If the insider pair cuts through the short-term barrier at the 100-day SMA, traders can expect a wave of bullish euphoria. This innovation comes just in time, with strong potential for a rebound.
In summary, the absence of obvious directional catalysts has resulted in a bit of a trader’s limbo. Political developments in the United States are compounding problems and creating new challenges for traders. This has only increased the burden on an already challenging trading landscape. Therefore, even the most seasoned of traders are encouraged to stay on the defensive and alert with their market strategies.