EUR/USD Free Falls as EUR/GBP Signals Bearish Continuation

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EUR/USD Free Falls as EUR/GBP Signals Bearish Continuation

The Euro has been pressured this week. The EUR/USD is continuing a free fall that has now pushed it below 1.18. The EUR/GBP is showing signs of continuing a downtrend which brought the pair below its 2014-lows to start the year. Let’s take a look at the charts.

EUR/USD 4H Chart 1/8
eurusd 4h chart 1/8
(click to enlarge)

Free-Fall: The 4H EUR/USD chart shows a market falling persistently since mid-December, after a brief consolidation. This week, the EUR/USD continued the downtrend as we saw poor inflation data out of the Euro area and Germany along with decent jobs data for the US (according to the ADP employment change report).

Support: The next key level for EUR/USD will be the 2005-low at 1.1638. If we do find support soon, we should limit the bullish outlook to the 1.1950-1.20 area first.

The EUR/GBP started the year falling to 0.7745. After breaking below the 2014-low, the pair rebounded as we can see in the 4H chart.

EUR/GBP 4H Chart 1/8
eurgbp 4h chart 1/8
(click to enlarge)

Pullback: We can see that the rebound stalled after tagging the previous resistance around 0.7867. Also note that price found resistance below the 200-period SMA and is now below the 100-, and 50-period SMAs as well. This shows maintenance of a bearish bias. The RSI has tagged 30, and for the most part held below 30, which reflects bearish momentum.

Bearish Continuation: This week, price action is signaling bearish continuation. Note the combination of a strong bearish candle, followed by a few bullish candles within the body of the bearish candle. Then another bearish engulfing candle followed as we got in to the 1/8 European session. As we get started in the 1/8 US session, price looks poised to test the 0.7793 support pivot, a break below which adds weight to the bearish continuation scenario.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.