EURUSD has traded lower after the bounce off the 1.1800 strong psychological level on Friday, while it opened with a small negative gap in Monday’s European session. However, the pair remains in the inverse head and shoulders pattern with the neck line now being the aforementioned handle.
In the short-term, the negative bias is likely to stay in place as the RSI continues to slope down around its 50 neutral level and the stochastic oscillator is in progress to post a bearish cross within the %K and %D lines. Despite the negative signals, the 20-day simple moving average (SMA) posted a bullish cross with the 40-day SMA in the previous sessions.
In the wake of further negative pressures and a drop below the 1.1720 support and the 38.2% Fibonacci retracement level of the upleg from 1.0340 to 1.2550, near 1.1708, could push the price until the 20-SMA of 1.1653 and then towards the 40-SMA of 1.1590 at the time of writing. In case of steeper declines the price could hit the 1.1530 barrier before heading towards the 50.0% Fibonacci of 1.1450.
On the flipside, as the pair stands above the SMAs a bullish tendency is also possible towards 1.1800 again and then until the 1.1840 hurdle. A violation of this region could increase chances for more gains, probably until the 1.2000 round level.
To conclude, the world’s most traded currency holds within the inverted head and shoulders pattern since June and a climb above the neckline would confirm the scenario for a reversal of the bearish structure in the medium-term.
Origin: XM
