EUR/USD fell sharply on Friday, after it hit resistance at 1.1690. The pair tumbled nearly 150 pips, breaking below the 1.1580 zone, which had been providing decent support since October 13th. Today, the rate rebounded somewhat, but bearing in mind that, overall, it continues to trade below the downside resistance line taken from the high of May 25th, we will adopt a negative stance.
EUR/USD may continue recovering for a while more, perhaps climbing back above the 1.1580 barrier. That said, we see decent chances for the bears to jump back into the action from near the 1.1627 zone, marked by the highs of October 26th and 27th respectively. This may result in a slide and a test near the low of October 12th, at 1.1524, the break of which will confirm a forthcoming lower low and may allow a test near the psychological zone of 1.1500. If the bears are not willing to stop there either, then a break lower may extend the current downtrend towards the 1.1465 zone, defined as a support by the inside swing high of July 20th, 2020.
Taking a look at our short-term oscillators, we see that the RSI rebounded from slightly above its 30 line, while the MACD, although below both its zero and trigger lines, shows signs of bottoming as well. Both indicators detect slowing downside speed and support the notion for some further recovery before the next leg south.
Now in order to abandon the bearish case and start examining a bullish reversal, we would like to see a break back above the 1.1749 zone, which provided resistance between September 21st and 24th. This could confirm the break above the aforementioned downside line and may initially target the peak of September 17th, at around 1.1790. If the advance does not stop there, then we could see extensions towards the 1.1837 zone, the break of which could pave the way towards the high of September 7th, at 1.1885.
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