This week could be another pivotal for the EURUSD, after the pair staged a decisive weekly close under the 1.1700 support level, marking an important technical breakout ahead of Jackson Hole.
Most of the technicals surrounding the EURUSD are pointing to further losses ahead, despite a number of important indicators, such as CCI and RSI showing that the pair is heavily oversold in the short-term. These oversold indicators should offer a warning that a technical bounce is possible.
Traders looking for a technical bounce any time soon will be at the mercy of the Federal Reserve. This seems more likely more likely this morning after the news that the Jackson Hole is being held virtually.
If we do see a bounce then the 1.1770 to 1.1800 would be the limit for the bear. Much above the 1.1800 level and bear capitulation is likely to take place, and the notion that a major technical bottom formed last week should increase.
Sentiment towards the EURUSD pair is actually offering a strong warning that more losses are coming, as some 72 percent traders are bullish, despite the massive range break last week.
Too high levels of positive sentiment are not concurrent with a strong recovery. However, that does not mean that sentiment is totally wrong, although I would much rather see a large negative bias forming in order to convince me that the EURUSD pair can rise.
EURUSD Short-Term Technical Analysis
The EURUSD pair is still very bearish on the four-hour time frame, and worse still a large head and shoulders pattern has started to take formation as the drop continues.
According to the overall size of the new formed head and shoulders pattern a 100-point price drop is coming while the EURUSD pair trades under the 1.1700 level.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, a major range took place last week, additionally, any hopes of notable triple bottom forming on the charts has been cast aside.
With the US dollar index in breakout mode we could reasonably expect the EURUSD pair to continue to take a big hit, with the 1.1540 and 1.1400 level probable downside targets ahead.