EUR/USD lower?

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Despite a healthy attempt at recovery from demand at 1.0488/1.0912 in October 2019 – a noteworthy area given the momentum derived from its base – EUR/USD failed to sustain gains and is currently seen revisiting the upper boundary of the said demand.

Although down 1.00% on the month and in-line with the primary downtrend, lower since 2008, we cannot rule out the possibility of fresh upside attempts from current demand, targeting demand-turned supply at 1.1857/1.1352 and long-term trendline resistance (1.6038).

To the downside, however, traders looking beyond the current demand zone likely have crosshairs fixed on a reasonably ‘fresh’ demand base at 0.9581/1.0221. Note this zone boasts history dating back as far as 2003.

Daily timeframe:

Demand at 1.0680/1.0781, an area formed April 2017 which houses a long-term 127.2% Fibonacci ext. point within at 1.0724, elbowed its way into the spotlight late last week and remains a dominant fixture on this timeframe.

Thursday’s 100-point gain lifted EUR/USD to an interesting area of resistance on the daily timeframe, comprised of trendline resistance from 1.1239, a trendline support-turned resistance from 1.0981 and a 50.0% retracement value at 1.1003. Also prominent is supply drawn from 1.1117/1.1078, currently mingling with the 200-day SMA.

The RSI indicator recovered from channel support and, in recent trade, rose through the connecting channel resistance, highlighting the possibility of moves to overbought territory.

H4 timeframe:

Thursday had the EUR/USD power into a small base of demand-turned supply at 1.1015/1.1002, following a break of two supply zones at 1.0958/1.0941 and 1.0924/1.0902, both now representing demand areas. Although current supply is void of local confluence, the daily resistances noted above dovetail with one another beautifully.

H1 timeframe:

Europe’s single currency rallied strongly against the buck Thursday, adding 0.98%. The US dollar index continued to explore lower ground, extending losses south of multi-year highs, pressured on the back of soft US Treasury yields. Note longer-term action on the dollar index also has price testing a daily supply-turned demand base at 98.65/98.19.

Technical headlines saw the EUR/USD welcome a test at 1.10, a key figure widely watched in the market, surrounded by a H1 supply area coming in at 1.1007/1.0994. Demand at 1.0933/1.0948 rests close by in the event we dip lower, seated north of the 1.09 handle.

The RSI indicator also recently journeyed into overbought waters, with the 50/100-period SMAs drifting higher since crossing at the beginning of the week.

Direction:

From the monthly timeframe, further recovery could be on the cards.

Technical levels on the daily timeframe, however, highlights appealing resistance, potentially drawing interest. Similarly, we have demand-turned supply at 1.1015/1.1002 recently making an appearance on the H4 timeframe and the round number 1.10 and supply on the H1 timeframe at 1.1007/1.0994.

The odds a correction materialises today is reasonably high, according to the noted chart studies. As such, bearish themes off 1.10 might be of interest today, using the H4 zone at 1.1015/1.1002 as a base for positioning stop-loss orders.