The week comes to an end with the EUR/USD trading at its lowest level since June last year, having been pretty much falling steadily since posting a high around 1.3700 early July: the weekly chart shows one red candle after the other, with some small consolidations in between. It also shows RSI at 21, signaling extreme oversold readings. What is not pointing out yet is the possibility of an upward correction, as indicators maintain a healthy bearish slope.
The rally is indeed overextended, but the daily chart also presents a strong bearish tone coming from technical readings, with 20 SMA having extended its decline to the 1.3000 level, which may be now the line in the sand for current bearish trend: if somehow the pair manages to recover, a pullback to such level will likely be seen as corrective rather than the confirmation of a bottom. But risk of an upward correction of course is there, and increased weekly basis, considering there was almost no corrections in this 900 pips slide.
Question is therefore what worth more, if trying to pick a bottom, or wait until the correction is over, the market shrugs off the excess of bulls and then sell. My take is that there is room for further declines, with 1.2740 as next critical support. If price breaks below it, I would forget about waiting to sell at higher levels, as the impact will probably drive the pair towards 1.2500 then. At current levels, an upward correction may extend up to 1.2920/50 area, so if the levels holds, then the pair will likely resume its slide. Above it, a quick test of 1.3000 is possible, and if somehow price breaks above, then the bottom will look more shaped, with chances of a recovery up to 1.3250 price zone.
View Live Chart for EUR/USD
The rally is indeed overextended, but the daily chart also presents a strong bearish tone coming from technical readings, with 20 SMA having extended its decline to the 1.3000 level, which may be now the line in the sand for current bearish trend: if somehow the pair manages to recover, a pullback to such level will likely be seen as corrective rather than the confirmation of a bottom. But risk of an upward correction of course is there, and increased weekly basis, considering there was almost no corrections in this 900 pips slide.
Question is therefore what worth more, if trying to pick a bottom, or wait until the correction is over, the market shrugs off the excess of bulls and then sell. My take is that there is room for further declines, with 1.2740 as next critical support. If price breaks below it, I would forget about waiting to sell at higher levels, as the impact will probably drive the pair towards 1.2500 then. At current levels, an upward correction may extend up to 1.2920/50 area, so if the levels holds, then the pair will likely resume its slide. Above it, a quick test of 1.3000 is possible, and if somehow price breaks above, then the bottom will look more shaped, with chances of a recovery up to 1.3250 price zone.
View Live Chart for EUR/USD
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