EUR/USD went as low as 1.2696 and then entered a low volatility sideways range during the previous weekend. The already existing bearish sentiment has become again stronger.
We are also noting the following apart from the indications from fundamentals and technical indicators mentioned above:
• The strong fall: Continuous heavy drop during past 3 trading days
• A strong weekly bearish close: After touching 1.2696, the currency pair closed at 1.2719 (just 23 pips over the low).
• The low volatility sideways range after the weekly low (practically 15 pips) for last 6 hours of trading.
All the above points make the bearish outlook for the coming week stronger. There may be some continued sideways move for some time and even some little upward correction but overall we expect more downward and deeper moves.
On the upside we would expect a strong resistance near 1.2800. With that resistance intact, the next move should be towards 1.2660. We can expect some support of the falling trend line near 1.2660/1.2650. A break below this will again have some support neat 1.2640 or near the low of September 2010. As mentioned during last analysis and mentioned above, we would expect a strong support in that range because the psychological support of the major 1.2500 level should start working there. A strong break below 1.2640 should take the EURUSD towards 1.2520 or near a very strong psychological support level of 1.2500.
Please note that I expect a slower downward momentum as the currency pair nears 1.2500 and we do not expect a break below that during the next week but overall a strong break below 1.2500 should bring supports near 1.2460 and then 1.2420 and then the next target should be 1.2355. Please check another slopping down trend line on EURUSD daily chart.
On the upside, as mentioned above, I expect strong resistance near 1.2800. Any firm break over 1.2820 will make our short-term outlook neutral and in that case I would expect a move towards 220day EMA or 1.2960 and eventually a fall from there.
Overall, since November 14th EURUSD has failed to reach 55-day EMA resistance level and only a strong break over that (over 1.3200 or a little above current 55-day EMA) will change our mid-term outlook for some further good gains.
From ForexAbode.com, the Forex trading site.
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Return to Forex trader Himanshu.