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The euro currency finally looks to have broken to the downside against the US dollar, after the positive headline number from the February Non-farm payrolls sunk the EURUSD pair below the 1.2000 handle with a strong degree of certainty and bearish conviction.
Following months of range-bound trading and choppy price action, the new multi-month low set on Friday looks to be the start of a new short and medium-term downtrend for the most widely traded currency pair.
The closely watched CoT futures report showed a major reduction in EURUSD long positions last week, which would certainly indicate that a shift in underway in the protracted uptrend in the EURUSD pair.
From a technical perspective, the sell signals are starting to line-up on the charts. A massive head and shoulders pattern has been fully activated, and the William Alligator indicator on the daily time frame is issuing its first major sell signal of 2021.
Aside from the big sell signals on the technical front, the fundamentals have also shifted in the favour of the US economy against the eurozone after the blockbuster jobs number last Friday. This is going to be a key factor on the macro side during the next quarter.
Traders and investors also have the European Central Bank policy meeting this week, which could be another nail in the coffin for the EURUSD pair. If the central bank jawbones the euro currency lower this week then the downside breakout in the pair is only going to accelerate over the coming weeks.
Additionally, the US CPI inflation release this week is another big risk event for the EURUSD pair. Rises in food and energy prices may show up in the February CPI reading causing further upside pressure on the greenback.
Looking at retail sentiment on the ActivTrader platform market sentiment tool a worrying development is taking place, which is also suggesting further losses. Over 70 percent of traders are bullish towards the EURUSD pair, despite the 200 point weekly price drop.
I would anticipate further losses in the EURUSD pair while this dynamic remains in place, and suspect that traders are refusing to accept that the pair may be moving into a new bearish trend.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that an inverted head and shoulders pattern has been invalidated, following the recent breach of the February swing-low, around the 1.1950 level.
According to the size of the invalidated head and shoulders pattern, the EURUSD pair could be preparing to drop towards the 1.1700 level. Watch out for more weakness below the 1.1950 resistance level this week.
Source By ActivTrader.
EURUSD Medium-Term Technical Analysis
Looking at the daily time chart, a large head and shoulders and shoulders pattern is activated while price trades below the 1.2060 level, placing the 1.1700 level squarely in focus.
The EURUSD pair is also moving towards the bottom of falling price channel, which is located around the 1.1800 level. Technical bounces from the 1.1800 level are possible.
Traders should also be aware that the Williams Alligator indicator on the daily time frame is generating a sell signal. This indicator is a powerful trend indicator, and the sell signal remains in play while the EURUSD is capped under the 1.2050 level.
Source By ActivTrader.
