EURUSD switched to consolidation following the dip to a 5 ½-year low of 1.0470 last week, ranging quietly between the 1.0550 resistance and the 1.0497 support for the fourth consecutive day.
The RSI and the Stochastics are making efforts to exit the oversold territory, though they need more convincing upside moves to signal the end of April’s sell-off, especially as the MACD remains negatively charged after crossing below a key base.
In terms of the market trend, the downward-sloping simple moving averages (SMAs) are endorsing the negative direction in the market. Also, horizontal trading at the bottom of a downtrend is usually considered a signal of the continuation of the original bearish pattern.
Hence, the risk is still skewed to the downside and, as long as the 1.0550 cap holds firm, a tumble towards the 2016 – 2017 bottom of 1.0339 is possible. Lower, all eyes will turn to the 1.0133 barrier, which was last active during the 1999 – 2002 period.
Should buying interest grow above 1.0550 instead, the price may ascend towards the red Tenkan-sen line at 1.0711. This is where the 23.6% Fibonacci retracement of the 1.1494 – 1.0470 is positioned, while the 20-day SMA is nearing that zone as well. Therefore, a step above that bar could navigate the pair directly to the 38.2% Fibonacci of 1.0860. Higher, a tougher battle could start between the 50% Fibonacci of 1.0982 and the broken restrictive surface of the 2008 bearish channel at 1.1045. A close above the latter is expected to clear the way towards the 61.8% Fibonacci of 1.1168 and the previous peak of 1.1184.
In brief, EURUSD is neutral-to-bearish in the short-term picture. Any violation above 1.0550 or below 1.0497 could set the tone in the market accordingly.
