EURUSD erases positive gap; signals mixed

EURUSD opened with a positive gap slightly above the 1.0900 level on Monday after a bearish week, but gains proved short-lived, with the price inching back below that number to turn negative on the day.

Technical signals are mixed. The RSI and the MACD have further extended their decline below their neutral thresholds. On the other hand, the Stochastics seem to have found a bottom in the oversold zone, suggesting a potential upside reversal in the price. Friday’s doji candlestick could also be a sign that the recent sell-off is losing steam, though that alone is considered a neutral signal unless a large green candlestick follows that setting.

Overall, the current market structure does not look very encouraging. A close below the nearby support of 1.0850 could see an extension towards the 1.0780 handle, while deeper, a tougher battle could take place near the 2020 low of 1.0636.

In the bullish scenario, where the pair swiftly recovers today’s setback, the price could push towards the 20-day simple moving average (SMA) and the 1.1000 mark. This is where the 78.6% Fibonacci 1.0636 – 1.2348 upleg is positioned. If that wall collapses, the rally could speed up to the 50-day SMA currently at 1.1121, or even higher to the important 61.8% Fibonacci of 1.1180. Additional gains from here would mark new higher highs in the very-short-term picture, likely strengthening buying forces up to the tentative descending trendline seen at 1.1275.

In the long-term timeframe, the market is preserving a downward trajectory and only a significant increase above 1.1492 would upgrade the outlook to neutral.

Summarizing, EURUSD is sending a mixture of signals. However, as long as it keeps trading below 1.0900, downside risks will outweigh upside ones.

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.

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