EUR/USD: Under pressure as CNY hit new trend low, RSI reporting oversold conditions
- The EUR/USD fell to 1.1320 in Asia - the lowest level since July 2017.
- Chinese yuan (CNY) fell to new trend low of 6.9068, triggering a broad-based USD rally.
- The sell-off in the EUR is now looking overstretched. The hourly RSI is creating a bullish divergence.
The Chinese yuan (CNY) fell to a new trend low of 6.9068 per US dollar in Asia, leading to a broad-based USD rally.
As a result, the EUR/USD fell to 13-month low of 1.1320, bolstering the already bearish technical setup: the common currency suffered a pennant breakdown earlier this month and closed yesterday below the all-important 200-week moving average support of 1.1356.
Hence, it seems safe to say the bears are in control and the EUR could soon drop to 1.13.
However, the 14-day relative strength index (RSI) is reporting oversold conditions. Meanwhile, the hourly relative strength index (RSI) is creating a bullish divergence. Thus, bearish momentum could wane in the next few hours.
On the data front, the US July retail sales are scheduled for release at 12:30 GMT. A better-than-expected print would only add to the bearish pressure around the EUR. On the other hand, a weak reading could help the oversold EUR regain some poise. The EUR pairs could also turn volatile during Bundesbank President Jens Weidmann's speech, scheduled at 16:00 GMT.
EUR/USD Technical Levels
Resistance: 1.1360 (200-week moving average), 1.14 (psychological level), 1.1433 (Monday's high)
Support: 1.1312 (July 5 low), 1.1285 (June 2 low), 1.1187 (61.8 percent Fibonacci retracement the rally from 1.0340 to 1.2556)
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
