EUR/USD Falls Below 1.11 Support
On 26 August, we discussed the potential for a pullback after the rally to 1.12, noting:
→ The fluctuations since April formed an ascending channel (indicated in blue, with support points marked by circles), and the price was near its upper boundary, where resistance was likely;
→ The 1.12 level also showed signs of resistance – the price briefly exceeded it before quickly falling back below; → Bearish divergence on the RSI indicator.
Just three days later, bearish signals continued to develop, leading to:
→ The formation of a bearish "head and shoulders" pattern (H&S) on the chart;
→ A more than 1% decline in price, breaking below the 1.11 level, which had provided support since 21 August.
Could EUR/USD continue to decline?
Technical analysis of the EUR/USD chart shows:
→ The RSI indicator has exited the overbought zone and fallen below the 50 line, approaching the oversold zone – a sign of changing market sentiment;
→ The price has broken the trendline (indicated in orange).
Today's decline in EUR/USD was also influenced by news of weakening inflation in Germany and Spain, which could prompt the ECB to ease its monetary policy.
If this is a correction after the significant A→B rally of 3.8% since the beginning of the month, the target could be around 1.10415 – a level that acted as resistance in mid-August. Additionally, this area coincides with:
→ The 0.618 Fibonacci retracement level, drawn between points A and B;
→ The target for a decline based on the height of the H&S pattern.
However, it's possible that bulls may regain control sooner and attempt to push the price back into the 1.110-1.120 range.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
On 26 August, we discussed the potential for a pullback after the rally to 1.12, noting:
→ The fluctuations since April formed an ascending channel (indicated in blue, with support points marked by circles), and the price was near its upper boundary, where resistance was likely;
→ The 1.12 level also showed signs of resistance – the price briefly exceeded it before quickly falling back below; → Bearish divergence on the RSI indicator.
Just three days later, bearish signals continued to develop, leading to:
→ The formation of a bearish "head and shoulders" pattern (H&S) on the chart;
→ A more than 1% decline in price, breaking below the 1.11 level, which had provided support since 21 August.
Could EUR/USD continue to decline?
Technical analysis of the EUR/USD chart shows:
→ The RSI indicator has exited the overbought zone and fallen below the 50 line, approaching the oversold zone – a sign of changing market sentiment;
→ The price has broken the trendline (indicated in orange).
Today's decline in EUR/USD was also influenced by news of weakening inflation in Germany and Spain, which could prompt the ECB to ease its monetary policy.
If this is a correction after the significant A→B rally of 3.8% since the beginning of the month, the target could be around 1.10415 – a level that acted as resistance in mid-August. Additionally, this area coincides with:
→ The 0.618 Fibonacci retracement level, drawn between points A and B;
→ The target for a decline based on the height of the H&S pattern.
However, it's possible that bulls may regain control sooner and attempt to push the price back into the 1.110-1.120 range.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
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