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The EURUSD pair has staged a major really range breakout against the US dollar on the foreign exchange market, following a report showing a three-decade high in US CPI inflation.
Yesterday’s stronger than anticipated US dollar report was in essence the straw that broke the camel’s back, with the US dollar index moving to a new yearly high and the EURUSD pair moving to a new yearly low.
The floodgates are now open for more EURUSD losses while the price trades below the technically important 1.1540 level which is a major market pivot to watch.
Selling rallies is the name of the game while the euro trades under the 1.1540 level, with the 1.1400 level being the initial target, however, the euro could go much, much lower than that.
I suspect that while the EURUSD pair trades under this level then we could even see a move towards the 1.1100 or even the 1.1000 level. The fundamentals are very much in favour of US dollar strength.
The sentiment is also worryingly high towards the EURUSD still and is basically confirming the sell-side is the is best towards the EURUSD from a contrarian point of view.
The ActivTrader Market Sentiment tool shows that some 726percent of traders are bullish towards the EURUSD. This is a four percent increase from last week and the increase comes on the back of a 150-point drop, which is a concern.
EURUSD Short-Term Technical Analysis
The four-hour time frame continues to show that the EURUSD pair has fallen under the neckline of a head and shoulders pattern, following the moving under last Friday’s swing low.
The short-term technical show that bears could be target the 1.1350 level. I think selling any rallies back towards neckline support is another good strategy here.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things look very bearish for EURUSD pair also after an even large head and shoulders pattern just broke to the downside.
If the EURUSD pair stays under the 1.1540 level then a 900-point decline could take place if we apply the overall size of the pattern, which would take the pair towards the 1.0600 level.
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