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The euro currency fell to a fresh multi-decade low of 1.0070 against the US dollar last week, following a stronger than expected Non-farm payrolls job report from the United States economy.
Traders are factoring in with more certainty that the Federal Reserve will implement a 75-basis point rate hike at the next Fed policy meeting. This will likely cause the US dollar to remain under pressure.
With this in mind the EURUSD pair is at a real risk of falling below parity this week. The technicals and the fundamentals are certainty indicating we could see a move below the 1.000 level this month.
More than likely the CPI report from the United States economy will be the main market mover for the FX market. A strong number in regard to inflation could start the run below parity for the EURUSD Pair.
A head and shoulders pattern that was activated last month is strongly hinting of a run below parity. The pattern in general has a downside projection that would take the EURUSD towards the 0.9800 level.
Something that is accelerating the downtrend right now is bullish sentiment towards the EURUSD. Sentiment is rising while the EURUSD pair heads lower.
The ActivTrader Market Sentiment tool shows that some 66 percent of traders are bullish towards the EURUSD. This is strongly suggesting for more downside ahead for the euro.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has formed some negative price divergence, which could hint at a bounce back when or if the pair reaches parity.
The MACD indicator shows that the divergence extends back towards the 1.0300 level. MACD across the lower time frames usually take days if not weeks to reverse, so it’s too soon to predict an immediate recovery.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things have gone from bad to worse for the EURUSD pair as large head and shoulders pattern has been activated now after the price moved under 1.0350.
Watch out for a further crash below parity, and possible the 0.9800 support level if we continue to see the EURUSD pair trading below 1.0350.
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