EUR/USD enters bearish short-term phase after break of key support level
EUR/USD has come under increased pressure after dipping another leg lower to break below the head and shoulders neckline at 1.1660. The drop below what was considered to be a key support level with strong downside momentum indicates that the market has moved into a bearish phase and further weakness is expected.
Prices have currently stabilized around 1.1615 and the 1.1470 level is expected to provide solid support. From here, the focus would shift to key levels at 1.1300 and 1.1100 ahead of the 1.0820 low.
Immediate resistance is now provided by previous support at 1.1660. Rising above this important level would target the area around 1.1845, which is where the 50-day moving average has provided a barrier during the past month. Thus, rising above this resistance would indicate the short-term bearish phase has ended and EUR/USD would be on the path to re-test the 1.2091 multi-year high that was hit on September 8. Clearing this point would confirm the resumption of the uptrend that started from 1.0820.
In the near-term, EURUSD is vulnerable, with risk clearly tilted to the downside as RSI is bearish below 50. The technical break of the head and shoulders neckline (1.1660) suggests downside risks remain.
Gold remains under pressure; maintains short-term bearish bias
Gold remains under pressure and risk is still to the downside as prices continue to drift lower from the 1300 psychological level. The short-term technicals are bearish and point to more weakness in the market.
Looking at the 4-hour chart, gold prices are looking capped by the 20 and 50-period moving averages which are negatively aligned after a bearish crossover that took place on October 19.
The next target is the October 6 low at 1260.59. At this stage, the market would likely see a resumption of the downtrend from the 1357.47 peak and put in place a lower high at 1306.05.
Upside moves are likely to find resistance at 1283.04. This is the 23.36% Fibonacci retracement level of the down leg from 1357.47 to 1260.59. There is an important resistance zone between 1296.77 and 1308.04 (38.2 and 50% Fibonacci levels). Rising above this area would help shift the focus to the upside towards 1335.25. Breaking this level could see a re-test of the 1357.47 high and turn the bias to bullish.
In the short-term, the bearish phase remains in play especially if gold prices continue to trade below the 50% Fibonacci and under the key 1300 level. In the bigger picture, the market is neutral to bearish as long as the 1260.59 level holds.
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