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 AB 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.
Read more: https://fxopen.com/blog/en/oa-eur-usd-falls-below-1-11-support/
Text source: Forex Trading Blog
