EUR/USD fell sharply on Friday following the better-than-expected NFPs, breaking below the tentative upside support line drawn from the low of May 30th. That said, the rate found support at 1.1207 and then, it rebounded somewhat. Today, the pair has been trading in a quiet mode, oscillating around the 1.1225 level. Overall, EUR/USD has been printing lower peaks and lower troughs since June 25th, which combined with Friday’s fall below the upside line, suggests that the near-term picture is negative.
We believe that the bears could take charge again soon and aim for another test near Friday’s low of 1.1207, and if they prove strong enough to overcome it, then we could see extensions towards the key support area of 1.1182, marked by the low of June 18th. However, before the next leg lower, we see the case for some corrective recovery, perhaps for the rate to challenge the 1.1245 hurdle, or even the aforementioned upside line as a resistance this time.
The case for some further recovery, before the bears decide to shoot again, is also supported by our short-term oscillators. The RSI has bottomed within its below-30 zone and now looks able to move back above 30, while the MACD, although below both its zero and trigger lines, is also showing signs of bottoming.
That said, in order to abandon the bearish case, we would like to see a decent break back above 1.1268, a resistance marked by the inside swing low of July 3rd. Such a move would drive the rate back above the upside support line drawn from the low of May 30th, and it may allow the bulls to target the 1.1295 zone. Another break, above 1.1295, could aim for the 1.1312 barrier, defined by the peak of July 3rd.
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