The Euro dips in early European trading on Monday, generating initial signal that recovery from last week’s spike low (1.0516) might be over.
Growing concerns about the contagion in the banking sector and fears that authorities won’t be able to contain crisis, despite announcement from major central banks about the joint action, released over the weekend, sparked fresh risk aversion.
Technical studies on daily chart are still bullishly aligned (positive momentum / converged 10/20DMA’s holding below the price) but the price action remains capped by the rising base of thinning daily Ichimoku cloud.
Adding to growing negative signals was last week’s bearish and long-legged weekly Doji candle, which points to strong indecision, as recovery stalled under the top of falling weekly cloud, reinforced by weekly Tenkan-sen, keeping the price action within the cloud.
Fresh weakness is pressuring pivotal supports at 1.0625 zone (converged 10/20DMA’s / Fibo 38.2% of 1.0516/1.0689 recovery leg), loss of which would weaken near-term structure and risk deeper drop, to generate reversal signal.
Initial resistance lays at 1.0685/89 (Fri / today’s highs), followed by more significant Fibo 38.2% of 1.1032/1.0516 (1.0713) and daily cloud base (1.0730), with sustained break higher needed to neutralize fresh bears.
Res: 1.0689; 1.0713; 1.0730; 1.0759.
Sup: 1.0620; 1.0600; 1.0582; 1.0551.
