EUR/USD weakens after surge last week

FX:EURUSD   歐元 / 美元
The Euro’s movement during the previous session reveals the strengthening of the bearish sentiment. After reaching a daily high of 1.2305 early on Wednesday, the pair managed to breach the 55– and 100-hour SMAs and the monthly R2.

As apparent on the chart, the Euro has formed a minor descending channel . In line with this pattern, the rate should edge higher towards 1.2230. Given that this area is reinforced by the aforementioned lines, a breakout might not occur.

On the other hand, the southern barrier is set by the weekly PP , monthly R1 and the 200-hour SMA . This cluster is also likely to hold strong, thus stranding the rate in the 1.2230/1.2100 area for the whole session.

The common European currency was driven by strong upside momentum on Thursday. As a result, it managed to breach a strong resistance area formed by the 55– and 100-hour SMAs and the monthly R2 circa 1.2235.

Subsequently, the pair was stranded in a narrow range between the aforementioned cluster and the upper boundary of a descending channel. The support of the former was enough to breach the given pattern and leave the rate trading near 1.2258 by Friday morning.

Given that no major fundamentals are scheduled for this session, the southern barrier is expected to hold strong, thus sending the Euro for slight appreciation towards the weekly R1 at 1.2310. In case this mark is surpassed, the next notable resistance is the distant weekly R2 and the monthly R3 at 1.2420.

EUR/USD’s reversal from the 1.2285 mark mid-Friday confirmed the formation of a new descending channel.

The increasing strength of the bearish sentiment was apparent later in the day when the Euro tried to surpass a significant support area formed by the 100– and 55-hour SMAs and the monthly R2 circa 1.2225. Any attempt to edge lower was interrupted when the pair opened 54 pips higher in this session which was followed by a re-test of the aforementioned support.

This day is quiet in terms of fundamentals; however, political events, especially the US turmoil over government shutdown, are likely to drive the market.

Technical indicators confirm that there is still some potential south, possibly down to the 200-hour SMA and the weekly S1 at 1.2150, that could be realised today.

Even though the losses of EUR/USD were limited solely to 11 pips on Thursday, the pair made two massive leaps throughout the day.

During the first one, the Euro started to appreciate during the ECB Press Conference when the lack of comments by Draghi about the strong currency was interpreted as a buying signal. Meanwhile, the rate edged in the opposite direction in the wake of Trump’s comment about Greenback’s upside potential in the future.

The pair has managed to appreciate in the Asian session; however, it should not exceed the 1.25 mark. Given that the US is to publish two sets of important fundamentals in this session, these releases are likely to guide the rate’s subsequent direction.

In case of strong bearish sentiment, the downside potential should be halted at the 200-hour located near 1.23.
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