The EUR/USD currency pair is facing strong selling pressure at the moment, putting it right on line to retest the lows made back in October. The pair hit a high of 1.1637 on Thursday. This path was turned completely on its head by disappointing economic data out of Europe and the impact of US monetary policy announcement spillovers. Market analysts are watching the new local resistance levels with bated breath. These levels, between 1.1623 and 1.1635 respectively, are important for predicting the pair’s next direction.
The EUR/USD pair witnessed extreme volatility even after hitting a new short-term high. It fell to a weekly low of 1.1549 right before Wall Street opened, weighed down by a strong rally in the US Dollar following the Federal Reserve’s monetary policy choices. As the pair neared 1.1577 on Wednesday, the move shifted into a higher gear. This move signaled a reversal in market risk appetite, with the dollar appreciating against the euro.
The current bearish sentiment for EUR/USD is further highlighted via a relative failure against major moving averages. The 100 and 200 Simple Moving Averages (SMA) have turned in downwardly successive lower prints, underlining aggressive selling. At present, the 20 SMA is at 1.1632. At the same time, the 100 SMA has flattened to roughly 1.1665 acting like a dynamic ceiling preventing any possible bullish movements from the pair.
In order to remove some of the overhang selling pressure, the EURO must close daily above 1.1632 level. In that case, more bearish moves could be uncovered at 1.1665. The inability to retake the nearby resistance levels from 1.1623 to 1.1635 shows a negative sentiment. That indicates that the prevailing path of least resistance will head south in the near term.
Combined, the market dynamics outlined above are a recipe for a bearish outlook for EUR/USD. The daily chart indicates that the pair is set to extend its downward move further. The bearish 20 SMA has slid below the 100 SMA and is plunging to the downside. Our global momentum indicator has cratered below the warning 100 line. At the same time, the Relative Strength Index (RSI) has dropped to 32.7, indicating that traders have turned very bearish.
Support for EUR/USD is very strong at 1.1309, supported by the 200-day base. This support area will be important, particularly if the pair dives under the key level of 1.1540, the base level from October. Technical indicators and overall market sentiment point to a need for caution. Traders must be careful and strategic as they trade in this unpredictable landscape.