The EURUSD pair has started to break into unchartered waters this morning due to news that could seriously affect the demand for the euro currency going forward in the medium to long-term.
Reports suggest that energy companies in Germany, Austria, Hungary and Slovakia are preparing to comply with a new payment system for Russian gas sought by the Kremlin.
The euro has plunged to a five-year low as the deal threatened the European Union’s (EU) unity and sanctions. So far, the Financial Times those preparations are currently underway.
Eyes are now on parity if the EURUSD pair starts to crack the 2017 trading low, which is close to the 1.0400 support level, which is of course only 100 pips away from price.
Something that is extremely worrying right now is that traders are not bearish towards the EURUSD at all. The pair is falling lower with a continued bullish sentiment skew.
The ActivTrader Market Sentiment tool shows that some 79 percent of traders are bullish towards the EURUSD. This is unchanged over the last 300 pip drop and remains a serious worry for more losses.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair is in the process of playing out a large head and shoulders pattern to the downside, which could propel the EURUSD pair towards the 1.0400 area.
Interestingly, the target of the pattern is the 2017 trading low, so it will be very critical that the EURUSD pair bounces from the 1.0400. If it breaks it could be disastrous.
EURUSD Medium-Term Technical Analysis
Looking at the weekly time frame things looks very bad for the EURUSD pair has now broken convincingly under a large wedge pattern that has huge downside potential.
If the EURUSD pair continues to drop, and moves under the 1.0400 area, then watch for an attack towards the 1.0000 region or even below parity and the 0.9800 level.