- The EUR/USD pair has developed a bearish continuation pattern.
- A fresh lower low could activate more declines.
- Only a new high can signal a bigger bounce.
EUR/USD price is trading in the red at 1.0189 at the time of writing. The bias remains bearish, so further decline is in the cards.
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Yet, after its massive drop, the price is trying to rebound. Technically, a temporary bounce could bring new selling opportunities. The price may test short-term resistance levels before dropping deeper. The price action has developed a downward continuation pattern, so we will have to wait for confirmation before acting.
The pair rebounded as the Dollar Index retreated even though US data was better than expected yesterday. The ISM Services PMI, JOLTS Job Openings and End Services PMI reported better than expected numbers.
Yet, despite positive economic data, the DXY looks overbought after its incredible rally. This is why a minor retreat is natural. Basically, the USD remains bullish despite a temporary pullback. The FED is expected to raise the fed funds rate by 0.50% or 0.75% at the July meeting.
Today, German industrial production rose 0.2% lower than expected 0.3% growth. Going forward, the U.S. unemployment claims indicator is expected to be 230,000 below 231,000 in the previous reporting period, while the trade balance could reach 2.5 billion.
EUR/USD Price Technical Analysis: Flag Formation
The EUR/USD pair found temporary support in the 1.0173 – 1.0182 area. As long as it stays above this zone, it could try to come back to test and retest the weekly S2 (1.0220), which is looking like a resistance level.
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As you can see from the 1-hour chart, the price action has developed a rising channel pattern that could signal further downside. A fresh lower low, a valid breakdown below 1.0173, could activate further declines. Only a new high, jumping, closing and stabilizing above 1.0220 could herald a bigger bounce towards the midline (ml) of the descending fork.
After its massive fall, a temporary rise is natural. The middle line (ml) represents strong dynamic resistance. The bias remains bearish if the EUR/USD pair is trading below.
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