Such an analysis of the 4-hour chart indicates that the EUR/USD currency pair may be due for a corrective drop in the near term. Traders need to stay alert to this important development. This dour forecast arrives on the heels of the EUR/USD continuing to retreat back under the key psychological 1.1500 level, cutting into Monday’s strong gains. Even with this temporary drop, a sharp erosion seems to be in the cards, the EUR/USD still holding strong above its moving averages.
As of early Tuesday, the EUR/USD has traded in a very narrow range under the 1.3400 mark. The currency pair is currently hovering near 1.1470 in the North American session. This movement reflects a small correction of the bullish trend of US Dollar. This recovery has taken hold after multi-year troughs and is affecting the trade of the EUR/USD.
From a technical standpoint, EUR/USD has been very overbought relative to all its moving averages. The 20 Simple Moving Average (SMA) is still firmly bullish, holding far above the longer-term averages, such as the 100 and 200 SMAs. The 20 SMA is just giving dynamic support now around the level of 1.1440. Resistance levels are at 1.1510, 1.1550, and 1.1595.
Market analysts note that the US Dollar is in the process of correcting its oversold conditions. Yet even so, it still doesn’t set out a positive option for investors. This development of events is keeping a lid on the upside potential for the EUR/USD pair. While the EUR/USD has given up ground in trimming back some of its recent gains, it still retains upward momentum.
In light of these developments, EUR/USD traders should proceed with caution. The duo’s performance depends on a number of outside factors, such as major economic releases and geopolitical events that can impact currency values. In particular, traders have their eyes sharply focused on these developments. They are watching important support levels at 1.1440, 1.1405 and more importantly at 1.1360. These levels can have a huge impact on upcoming price action.