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The EURUSD pair had another soggy weak on the foreign exchange market, even the single currency could not get off the ground after the September Non-farm payrolls job report came in much weaker than expected.
Logic would dictate that the weak jobs number would cause a EURUSD rally, due to the fact that the FED are less likely to taper QE at the next policy meeting, or even this year.
The single currency could face additional volatility in the weeks to come, as German coalition talks, and the increasing policy divergence between the ECB and Federal Reserve are likely to dominate EUR sentiment
Something to note is that EURUSD pair is extremely oversold as it trades towards 18-month lows. This is a dangerous time for both bulls and bears due to the trend being bearish, but the pair is vastly oversold.
For example, the RSI indicator is showing that the EURUSD pair is now at its most oversold since January 2020 on a daily and weekly basis. Similarly, the Stochastic and MACD on the weekly is very oversold.
Something that EURUSD bulls will need to see is wholesale bearish sentiment towards the pair. At the moment, traders are not bearish towards the EURUSD, which may mean more losses are here to stay.
The ActivTrader Market Sentiment tool shows that some 72 percent of traders are bullish towards the EURUSD. We probably need to see around 80 percent bearish sentiment for a powerful recovery to take hold.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows bullish MACD has formed, which makes me think that a counter rally could come once we see a sentiment shift towards the EURUSD pair.
The bullish price divergence extends towards the 1.1750 level, which is probably the first real bullish target. The MACD and RSI on the mentioned time frame both have positive price divergences.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame a large and complex inverted head and shoulders is well worth here, and especially if a recovery towards the 1.1750 and 1.1980 area takes hold.
A series of daily price closes above the 1.1900 level should confirm that the pattern has officially formed. At the moment, a reversal has yet to occir occurred, so further downspill towards the 1.1500 to 1.1450 area is still possible.
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