EUR/USD drops to a 4-month low; enters the oversold area.
EUR/USD met strong resistance near the broken ascending trendline at the end of January and changed direction to the downside, violating its uptrend off 1.0878 and diving to a four-month low of 1.0940 early on Monday.
From a technical perspective, the short-term bias remains negative since all indicators are still located in the bearish area. Yet, the odds for an upside correction are increasing as the RSI and the Stochastics approaching oversold levels.
Should an upside reversal happen, the bulls would try to close above 1.1000, which is marginally below the 23.6% Fibonacci of the down-leg from 1.1447 to 1.0878. A successful breach of that level could add more legs to the rally, sending the price towards a tougher obstacle around 1.1094, where the 50-day simple moving average (SMA), the 38.2% Fibonacci and the ascending trendline all coincide. Running higher and more importantly above the 200-day SMA, buyers could gain extra confidence, with the spotlight turning next to the 50% Fibonacci and the 1.1175 area.
In case selling pressure extends below 1.0920, the nearest key support to watch is the 2019 trough of 1.0878. Clearing that floor, the bears could retest the 1.0815 former restrictive area ahead of the 1.0720 level taken from the lows of the 2015-2016 period.
In the medium-term window, the outlook remains neutral and only rise above 1.1175 would cause a switch to positive sentiment.
Summarising, EUR/USD is viewed as bearish in the short-term with a potential for an upside correction rising. In the medium-term, the pair maintains a neutral outlook as long as it holds below 1.1175 and above 1.0878.
All trading involves risk. It is possible to lose all your capital
This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.