EURUSD Technical Analysis | Forexlive

The
market is starting to price in a more hawkish path for the Fed as the economic
data since the last FOMC meeting surprised consistently to the upside. Fed
Chair Powell recently said that the majority of the FOMC expects two or more
rates hikes this year if the data remains strong.

On the
other hand, the ECB has basically pre-committed for a rate hike in July but
what they are going to do in September is a much bigger debate. In fact, recent
economic indicators for the Eurozone started to disappoint by big margins and
point to a recession sometime in the second half of the year.

All else
being equal, we may start to see the EURUSD pair drift lower as the market
prices out the ECB rate hikes and prices in rate cuts.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that we may have a
major head and shoulders pattern
on EURUSD with the black trendline as the
neckline. The price might encounter the neckline somewhere in the 1.07 handle
and a break lower would open the door for a major fall into the 1.02 handle.
The moving averages at the
moment are crossed to the upside keeping the uptrend intact. The red 21 moving
average is acting as support for the buyers. If the price falls below the
moving average, then we can expect more bearish momentum following and the price
reaching the neckline.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we may have
another minor head and shoulders pattern formed right at the 1.10 handle. Technically,
this is called a king’s crown pattern because the low of the right shoulder is
lower than the low of the left shoulder. This is a stronger sign of a possible
change in trend because the price has made a new lower low.

The head has also diverged with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. The price then broke below the trendline and rallied back to retest
it at the 78.6% Fibonacci retracement level.
Overall, this is a perfect bearish setup, so if it fails, we are likely to see
more higher highs as the bullish momentum must be strong at that point.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has made a double top at the
1.0930 resistance zone
with the neckline standing at 1.0870. We have also a support level at the
1.0845, but it’s highly likely that we’ll see the support level break if the
price breaks below the neckline as momentum sellers will start to pile in
aggressively and push the price to new lower lows.

The buyers can either try an entry at the
1.0845 support with a defined risk below the level or wait for the price to
break above the 1.0930 resistance zone to invalidate the bearish setup and
target the 1.1033 level.

Upcoming Events

Today it’s a holiday in
US for Independence Day, so the liquidity will be thinner. In the following
days we’ll have some important economic data like the US Jobless Claims and ISM
Services PMI on Thursday and the main event of the week: the US NFP report on
Friday.

See also the video below: