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The euro currency suffered huge losses against the US dollar last week as traders flocked back into the greenback after the FOMC meeting showed a clear hawkish tilt amongst FED members.
Major moves are currently taking place across the foreign exchange market as traders and investors reprice the US dollar against other major currencies. The pace of the downside move in the EURUSD pair last week is certainly hinting that further heavy losses are still possible this week.
A seismic shift has taken place in the EURUSD pair’s technical backdrop after a multi-day and weekly price close under the pairs key 200-day moving average. The EURUSD is now testing critical trendline support across multiple time frames.
The trendline in question is found around the 1.1840 level and basically denotes the start of the breakout up move in the EURUSD, which really took hold between March and May 2020.
Should we see this key trendline taken out then a further breakdown in price towards the current yearly low, around the 1.1700 level is highly possible. A massive head and shoulders pattern is also looming over the EURUSD pair.
Potential catalysts for the next move in the EURUSD pair this week are scheduled speeches from Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde. EU and US PMI manufacturing data will also be a big deal for euro traders over the coming days.
The ActivTrader market sentiment tool shows that a big shift has taken place in sentiment, with some 64 percent of traders are bullish towards the EURUSD right now. Bullish sentiment amongst the retail crown has increased dramatically. This is a very bearish sign.
EURUSD Short-Term Technical Analysis
The EURUSD pair has a huge week ahead in the short-term horizon as the sellers approach the current yearly low, around the 1.1700 support level.
A key point to note is that the EURUSD pair broke above the February 2021 high last month, around 1.2240, meaning that the pair is making higher highs still.
If bulls can defend the 1.1700 level it will be extremely bullish for EURUSD traders, and this could be a powerful signal that a reversal is going to take hold.
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EURUSD Medium-Term Technical Analysis
The daily time frame shows that a head and shoulders pattern is starting to come back in focus after last weeks massive price drop, and the subsequent breach of the EURUSD pairs 200-day moving average.
Failure to defend the 1.1840 and 1.1700 support levels will provide a strong indication that sellers are trying to ignite the bearish pattern, with the neckline of the pattern located around the 1.1600 level.
Should we see the 1.1600 level broken then the EURUSD pair could capitulate towards the 1.1300 support level as a minimum.
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