Is EURUSD poised for more drops as is evidenced by technical clues? Let’s analyze the facts.
On our previous article https://thelivetraderoom.com/can-eurusd-break-the-descending-channel/, we projected a bearish scenario for the EURUSD pair. Evidently, that scenario only would become active if the pair’s price broke down the 1.1300 level. As witnessed yesterday, that is what happened. The price went from the top of the descending channel down to its bottom trend line. On its way down, it crossed the 1.1300 level without hesitation.
The MACD
As we already know, the MACD has the power to catch quite well the transitions from bullish to bearish and vice-versa.
Looking at the EURUSD chart, we observe that its MACD yesterday made a quick shift to bearish. Hence, potentially signalling more downside for this pair.
The Bollinger Bands
With its latest price action, this pair’s price moved beyond the -2 Bollinger line, and almost touched its -3BB. Today is bouncing off of its lows. After a price moves beyond the -2BB, a typical action is an upward price movement to visit the vicinity of the BB mid-line, then, proceeding with more price drops on what it’s usually called a “dead cat bounce”. Obviously, that doesn’t mean the price should go up too much. That’s because the BB lines move downwards, closing in distance with the price.
Our Scenario
we think the price will test the 1300 level this week. Even, it could create a false breakout, topping near the BB mean and proceeding downwards, to visit the next support level, at about 1.1135.
Final caution
We should be alert to the news about Italy’s government over Brussels rejection of its budgeted 2.4% deficit. A well-documented Italian source estimated a 2.6% deficit if the Italian government stick to its plans, and Brussels demands a 2% limit on a country with the second highest debt-to-GDP ratio.
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