The EUR/USD and GBP/USD started the week with a spike down into new lows, continuing their respective downtrends. The spike suggests that bears are still in charge, but there are some buyers for EUR/USD at 1.19 and GBP/USD at 1.52. Let’s take a look at the charts to assess the technical conditions.
Bearish Continuation: The EUR/USD has revived a prevailing bearish trend since mid-December when it retreated from 1.2570. Note that price has since traded below the 200-, 100-, and 50-period SMAs, and the RSI has repeated tagged 30. The bearish conditions extended into the start of this week as price fell below 1.20 and even below 1.19 briefly before a quick rebound.
Oversold: We are seeing some support here just under 1.19, and the 4H RSI reading can be interpreted as extremely oversold. So while the EUR/USD continues to be bearish, the area between 1.19 and 1.20 might not be a good place to short at least until further consolidation after which the market would no longer be oversold.
Key Support: Price is essentially testing the the 2010-low at 1.1875. Let’s expect some consolidation or at least choppiness this week as EUR/USD remains bearish but is oversold and at a key support. Now below 1.1875, the next key support might be the 2005-low at 1.1638.
Bearish Spike: GBP/USD ended last week falling into new lows, continuing the 2014-downtrend. This end of year-beginning of year decline was sharp, breaking a December-low/support at 1.55 and starting this week with a spike down to 1.5170.
Oversold: We do see a sharp rebound here around 1.52, so we know there are some buyers/profit-taking around these levels, especially with the 4H chart showing extreme oversold condition.
Support: For cable, the decline below 1.52 is breaking below lows in 2011-2012. The next key support will be the 1.50 psychological level, then the 2013-lows in the 1.4815-1.4840 area.
Previous Post by Author: EUR/AUD Rejecting a Bearish Attempt at a Critical Juncture