The euro currency fell sharply against the US dollar on the April monthly price, as month-end flows and a sudden market move into risk-aversion mode caused the pair to melt back towards the psychological 1.2000 level.
Despite the big price pullback the EURUSD pair still managed to close the month firmly in green, which indeed sets up the prospect of a pivotal trading month ahead, and it also leaves the door open for a price recovery in the EURUSD pair.
What the technicals currently show is that the short-term bias for the EURUSD pair remains bearish while the price trades under the 1.2080 level. A huge amount of technical selling took place once the euro cracked the 1.2080 support barrier on Friday.
Looking at lines in the sand for EURUSD on the technical front this week, I would suggest that sustained weakness below the 1.1940 level, which is the pair’s 200-day moving average is a game changer. In short, sustained weakness below the 1.1940 and the EURUSD will also be on a slippery slope.
Even though the technicals are pretty bearish in the near-term the EURUSD pair is likely to be heavily data driven this week. Financial markets are likely to battle with the idea of risk-on sentiment and the FED changing policy if United States data point continue to come in red hot again this week.
Looking at retail sentiment negative sentiment towards the EURUSD pair has reached 57 percent now, which means that retail traders are on the right side of the move right now and continue to grow bearish.
It may be prudent to watch the behaviour of EURUSD bears over the coming days to gauge whether the bearish bias is increasing. Should we see increased negative sentiment would be a potential yellow flag, that could suggest a counter move is coming.
EURUSD Short-Term Technical Analysis
Bulls have to be careful this week, after the EURUSD pair posted its largest daily reversal candle since February 26th. Furthermore, the EURUSD pair posted its largest four-hour reversal candle since November 20th last year.
Fibonacci retracement analysis shows that the 50 percent retracement of the April high to the yearly low, current sits at 1.1940, and is coinciding with the pair’s 200-period moving average on the four-hour time frame.
This could be a potential bearish target of reversal spot if the 1.2000 level cracks. Gains above the 1.2080 level and the EURUSD pair should be well on its way to recovery mode, and potentially the 1.2200 level.
EURUSD Medium-Term Technical Analysis
Looking at the daily time chart, a bearish head and shoulders pattern remains the dominant theme and continues to linger of the EURUSD pair.
Going forward, bulls really need to crack the 1.2340 area to invalidate the price pattern and change the technical landscape over the medium-term.
The bearish case will be significantly increased if the pair’s 200-day moving average is broken, around the 1.1940 area.