After consolidating for a couple of sessions, the EUR/USD fell further during the 7/22 European session. Price is essentially testing the 2014-low of 1.3476. Here are a few things to consider from the daily chart:
EUR/USD Daily Chart 7/22)
(click to enlarge)
2) The RSI is still above 30, so EUR/USD can fall further before dragging the RSI reading into what traders will consider oversold territory (below 30).
3) Price is trading below all of the 200-, 100-, 50-day simple moving averages in the daily chart.
4) Price has broken below a rising trendline connecting the lows of July 2012 (1.2041) and July 2013 (1.2755) . It appears that July 2014 is not following suit. (refer to the weekly chart below).
(click to enlarge)
Here are 3 targets to consider for the bearish outlook below 1.3476, the current 2014-low:
1) 1.3425: This is where the 200-week SMA resides. The 200-week SMA is a long-term moving average that provided support in Oct. 2013. It is a key moving average for long-term traders. You can expect buyers here to challenge the bearish outlook.
– If price can move below 1.34, and thus clear the 200-week SMA, the bearish outlook should strengthen. To strengthen the case for a bearish outlook in the medium to long term, I want to also see the weekly RSI break below 40, which would show loss of momentum established throughout 2 years of bullish action.
2) 1.3295-1.33 Support Pivot: A break below the 2014-low also opens up the Nov. 2013 low at 1.3295-1.33. Being able to reach this point is already a strong bearish sign. By this point, the former 2014-low around 1.3476 should be considered a possible resistance if there is a pullback.
3) 1.3245-1.3250. 38.2% Retracement: If the 2014-low breaks, EUR/USD is likely in a bearish correction against a 2-year rally from 1.2042 to 1.3993. A conservative expectation for a bearish correction is 38.2% retracement, which is at 1.3248. Thus, If we EUR/USD breaks below the 2014-low, and gives us a couple more bearish signals to confirm the breakout, it is not an aggressive expectation for a retracement toward 1.3250.
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