Technical Analysis – EURUSD capped by 40-day SMA; bearish cross may restart descent   


Anthony Charalambous, XM Investment Research Desk

EURUSD found some difficulty in pushing below the 1.0990 support, returning the price back above the 1.1005 level, which is the 23.6% Fibonacci retracement of the down leg from 1.1411 to 1.0878. The picture seems negative overall, given the downward slopes in the 200-day simple moving average (SMA), as well as the 100-day one and 20-day mid-Bollinger band.

That said, negative directional momentum seems to have stalled, something reflected by the flat 40-day SMA and the short-term oscillators. The MACD, although below its red trigger line and in the negative zone, has flattened, while the RSI – also located in the bearish region – is rising towards its neutral mark.

If sellers pick up, immediate support to surpass is the 23.6% Fibo of 1.1005 followed by the area of 1.0990 to 1.0980, related to the swing lows from October 15 and November 14 and where the lower-Bollinger band lies as well. Diving lower, another support area from 1.0940 to 1.0925 could halt further declines towards the multi-year low of 1.0878 and 2017 May low of 1.0840.

To the upside, initial resistance comes from the bearish cross residing around 1.1040, ahead of the 100-day SMA at 1.1068 and neighboring 38.2% Fibo of 1.1082. Climbing higher, the nearby upper-Bollinger band coinciding with the swing high of 1.1096 could interrupt the test of a more challenging region from 1.1145 to 1.1175, where the 50.0% Fibo, the 200-day SMA and peak of 1.1175 exist.

Overall, the short-term is looking increasingly bearish and a break below 1.0990 would strengthen the negative outlook. Yet, a break above 1.1175 could throw into question the medium-term negative bias.