{x} | Trading.live

Abstract: The EURUSD continued its decline on Tuesday, falling below 1.0950 before the New York session. Before the release of key inflation data this week, the USD continued to benefit from the risk-averse market atmosphere, forcing the EURUSD to be at a disadvantage.

Fundamentals

In August, the EURUSD may remain in the range of US$1.0800-1.11. The EURUSD has managed to ride out the bad days. At present, investors are reluctant to sell cyclical currencies such as the EUR, and the expectation of ending interest rate hikes in the U.S. leaves little room for the USD to rebound.

The EURUSD traded at a new weekly low on Tuesday, not far from the bottom of the previous week of 1.0912. Given the technical indicators in the negative range resuming the decline, the downward momentum will continue to gain strength, and the technical indicators in the 1D timeframe are conducive to the bearish continuation. At the same time, the 20-day SMA fell slightly, much higher than the current level. While 100 SMA provides dynamic support around 1.0920. A bearish breakout of the price range could lead bears to test the July 6 low at 1.0833.

Within the 4-hour time frame, the downside extension is more pronounced. The Momentum indicator is crossing the midline with enough strength to enter the negative zone, while the Relative Strength Index indicator is almost vertically down, currently sitting below 40. Furthermore, the EURUSD is currently trading below all of its SMAs, with the 20 SMA holding flat around 1.0975. As long as sellers continue to refuse to advance around the 1.1000 level, the bearish scenario will persist.

Technical Analysis

The EURUSD is slightly lower today and broke below Friday's starting point. The price is currently hovering in the 1.0930-1.0957 range, competing with the May 31, 2023 upward-sloping trendline. Meanwhile, the ongoing convergence of the 50- and 100-day SMAs has yet to come into play.

In this case, most momentum indicators confirm the existence of bearish pressure.

The Average Directional Index (ADX) is slightly above 25, indicating a mildly bearish trend, while the Relative Strength Indicator is once again below its midpoint and the stochastic oscillator is moving lower and forming a good gap with the SMAs. However, the current lower lows in the stochastic have been swallowed up by higher lows, thus suggesting a bullish divergence is forming.

If prices retrace, they will overcome the support levels at the 50- and 100-day SMAs in the 1.0921 - 1.0940 range. They then test the key 1.0833 - 1.0864 range before potentially facing the busier 1.0727-1.0752 range, which consists of December 15, 2022 high, the 200-day SMA, and the 23.6% Fibonacci retracement of the September 28, 2022-April 26, 2023 uptrend, respectively.

On the other hand, if the bulls try to take advantage of the divergences that are forming in stochastics to continue higher, they could aim for a break above the May 31, 2023 trendline and the busier 1.1032-1.1095 range. The range consists of the February 2, 2023 and April 26, 2023 highs respectively. They will then attempt to test resistance set by the upward-sloping trendline of September 28, 2022, which is slightly below the March 31, 2022 high of 1.1184.

Overall, it is expected to follow through with a continuation of the downside after the EURUSD fell below Friday's lows. The current calmer market conditions seem to favor EURUSD bears. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 1.0950

Target price: 1.0840

Stop loss: 1.1020

Deadline: 2023-08-22 23:55:00

Support: 1.0912, 1.0896, 1.0845

Resistance: 1.0969, 1.1011, 1.4042