EUR/USD technical analysis: Lower highs indicate the path of least resistance is to the downside

EUR/USD is on the defensive, having charted a bearish lower high above 1.12.
The pair risks falling back to the Aug. 1 low of 1.1027.

Omkar Godbole FXStreet Contributor

EUR/USD is looking south, having carved out a bearish lower high near 1.1250 over the last few days.

The currency pair picked up a bid at 1.1027 on Aug. 1 and jumped to 1.12 on Aug. 5. In the six trading days to Aug. 13, the pair repeatedly faced rejection above 1.1230 and ended up charting a small knot of congestion that looked like a bull flag pattern, a continuation pattern.

A breakout would have opened the doors for levels above 1.14 (flag breakout target as per the measured move method).

The pair, however, fell to 1.1131 on Wednesday, confirming a downside break of the flag.

Essentially, the bounce from the Aug. 1 low of 1.1027 has ended up charting a bearish lower high. Put simply, the recovery rally has ended and the bears seem to have regained control. So, a fall back to 1.1027 could be in the offing.

As of writing, the pair is trading at 1.1144, having hit a low of 1.1133 earlier today. The outlook would turn bullish if and when the pair prints a daily close above 1.1250, invalidating the bearish lower highs pattern.

Daily chart

Trend: Bearish

Pivot points

1. R3 1.1238
2. R2 1.1214
3. R1 1.1176
PP 1.1154
1. S1 1.1116
2. S2 1.1092
3. S3 1.1054

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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