EURUSD generated extra losses after breaking the neckline of the double top formation with a ceiling at 1.1174 in the four-hour chart – a signal that a trend reversal may be in progress.
The price has breached the 200-period simple moving average (SMA) too on the way down and is currently consolidating around the 50% Fibonacci of the upleg from 1.0878 to 1.1178 as the RSI and the Stochastics are exiting the oversold areas. The MACD also looks to be recovering below its red signal line, though, as long as all indicators remain deep in bearish territory the odds for a meaningful rebound in the price are minimal. It is also worth noting that the 20- and the 200-period SMAs are heading for a bearish cross.
Should downside pressure return, the 61.8% Fibonacci of 1.0992 is expected to deter steeper declines ahead of the 1.0966 support level. Beneath the latter, some consolidation may emerge between the 78.6% Fibonacci of 1.0942 and the former strong barrier of 1.0925, where any violation could open the door for the 1.0903 obstacle.
On the upside, a rally above the 38.2% Fibonacci of 1.1064 and more importantly above the 1.1072 neckline would eliminate the negative sentiment, with buying interest probably increasing towards last week’s high of 1.1092 and the 23.6% Fibonacci of 1.1107. Further up, the 1.1140 resistance could next attract attention.
Looking at the bigger picture, the pair is in a range within the 1.1174 and 1.0878 boundaries and any violation at these edges could determine the future direction in the market.
In brief, EURUSD is searching for a rebound after confirming the creation of a bearish double top pattern below 1.1072. Only a rally above that number would eliminate downside pressures, while an upturn above the 1.1174 ceiling would put the market back on the bullish path in the bigger picture.
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