Former Congestion Area Enough to Stop Downtrend Continuation?
The Euro has sold off in dramatic fashion against the US Dollar, with EUR/USD aiming to complete its third consecutive monthly loss. Nevertheless, the currency pair has entered a zone of congestion (1.1630 – 1.1904) that could provide a possible area of support. Still, with momentum to the downside seemingly increasing, prices may yet pierce below this hurdle.
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Should the support zone give way, EUR/USD may get its next chance for respite near the 1.1412 level. On the weekly timeframe, the MACD indicator is growing increasingly bearish, evidenced by the histogram’s acceleration lower. The oscillator’s centerline is also in danger of being breached. The last such occurrence preceded a prolonged selloff.
EUR/USD Weekly Chart
Chart crated with TradingView
Zooming out to the monthly timeframe reveals EUR/USD’s bearish price action since making an all-time high in 2008, with a break and retest of resistance-turned-support preceding the January swing high. That coincided with a prior level of major support. Prices have pushed lower since, and trendline support appears to be in the crosshairs once more.
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The 38.2% Fibonacci retracement and 2016 high may supply intermittent levels for price to cogitate. A break below support is likely to renew bearish vigor. Even so, prices may very well continue to drift lower even if support holds. All things considered, EUR/USD’s downward push might slow somewhat, but without a break above the 1.2231 plane, a downbeat outlook remains.
EUR/USD Monthly Chart
Chart crated with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
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