EUR/USD Analysis
Evening Update: Will the EUR/USD pair continue to tumble or bounce back from its current zone around 1.0950 ?
On the weekly chart, the EUR/USD pair is currently trading below the 200 DMA after encountering strong resistance from the 1.1150 zone. Since EUR/USD is 58% weighted in DXY, the Dollar Index's rapid rebound was the key driver of the EUR/USD collapse. The Dollar Index was trading near a solid support zone of 100.50-100.80, as we covered in our study, and it quickly recovered.
- After a strong rejection, the EUR/USD fell below the 200 DMA.
- The EUR/USD pair was forcefully rejected by the trendline and the 200 DMA, as shown by the chart; as a result, the price may now move into the 1.0500 and 1.0700 zones, respectively.
- Given that the 200 DMA on the weekly chart is situated close to 1.1150, the point at which the 200 DMA converges with trendline resistance, we may expect the EUR/USD price to continue declining.
Please see the chart above, which illustrates the resistance in the EUR/USD and how it is positioned in relation to the weekly 200 DMA. The trendline resistance is the 1.1150 zone, and the EURUSD dropped quickly and is currently trading close to the 1.0950 zone. In our analysis of DXY, we noted that the Dollar Index was likely to rise from its current trading range of 100.50 to 100.80, which is a solid support zone. Since EUR/USD and the Dollar Index are inversely correlated, a rise in DXY will cause EUR/USD to decline and vice versa. Thus, the increase in DXY was mostly responsible for the loss in EUR/USD.
Let's now examine the EUR/USD chart using the RSI:
The chart depicted above demonstrates the RSI negative divergence, which occurs when the price of EUR/USD rises while the RSI falls. When RSI is trending lower and the price of a securities is rising, this is known as negative divergence. An early warning that the price of the underlying security may be reversing can be provided by this kind of negative divergence.
The EUR/USD pair may continue to decline, with more downside offered by the 1.0700 and 1.0500 zones. Since the EUR/USD is inversely proportional to the Dollar Index, as previously suggested, DXY may rise to the 1.0350 and 1.0400 zones, respectively.
Please examine the weekly chart's levels of support and resistance for the EUR/USD. Every level is shown in a spot chart.
|
EUR/USD |
Support |
Resistance |
|
Level 1 |
1.0700 |
1.1150 |
|
Level 2 |
1.0500 |
1.1200 |