The Euro Stoxx 50 (EU50) index hit a 22-month low of 3167.70 on October 12, falling further below its moving averages (MA), before reversing higher. However, the rebound was cut short today after the index met resistance at the 38.2% Fibonacci retracement level of the down-leg from 3453.70 to 3167.70.
The easing of the positive momentum is supported by the RSI, which appears to be flatlining before even reaching the 50-neutral level. However, the stochastics suggest there is more upside to come as the %K and %D lines are still rising.
If the index breaks above the 38.2% Fibonacci at 3277, the next key resistance could arrive at the 50% Fibonacci at 3310. Further up, the 61.8% Fibonacci at 3344 is another important level to beat as this would open the way for the 50-day MA, currently around 3365. Climbing above the 50-day MA would help shift the near-term bias to a bullish one.
However, failure to overcome the 38.2% Fibonacci would put the focus back to the downside, with immediate support likely coming from the 23.6% Fibonacci at 3235. A more significant support is the 22-month low of 3167.70. A drop below this trough would deepen the bearish phase for the index and underscore the negative outlook in the medium term.
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