EUR/USD Into A Corrective Phase!

EUR/USD is trading in the green today and is fighting hard to rebound after the short term decline, it is traded at 1.1199, but the selling pressure remains high as long as the pair is traded below the 1.1200 - 1.1240 area.

The bias is bearish in the short term, despite today‘s rebound, Friday’s bearish candle has signaled a potential larger drop. Well see what will happen after the Euro-zone and the US data will be released today.

The Euro-zone Consumer Confidence could increase from -19 to -15 points, while the US Existing Home Sales could drop from 4.33M to 4.15M in May. EUR/USD could change little today, the traders could wait for tomorrows data, the US and Euro-zone will publish the manufacturing and services figures, these numbers could bring high volatility and a significant move.

EUR/USD remains under some pressure on the Daily chart after Fridays false breakout with great separation above the 1.1240 and above the R1 (1.1243) level. The pair is expected to drop as long as it stays below the minor downtrend line, EUR/USD could come back to test and retest this line before it will resume the downside movement.

EUR/USD has rallied today only because the USDX has decreased a little in the fresh start of the week, still, the dollar index could resume its rebound in the short term, this scenario will force EUR/USD lower.

EUR/USD is into a corrective phase after the price has failed to make a valid breakout above the upper median line (UML) of the major descending pitchfork, only a valid breakout above the UML will confirm that the correction is finished and that the pair will resume the upwards movement.

You can see in the chart above that the US Dollar Index has managed to jump and close above the S1 (97.36) static resistance, it could climb higher if it stays above this broken upside obstacle.

As Ive said in the previous week, USDX could approach and reach the upper median line (UML) of the major descending pitchfork after the failure to reach the median line (ML) and after the false breakdown below the 96.00 psychological level.

USDX could only retest the S1 (97.36) level before it will resume its upside journey, so a USDX‘s further increase will push EUR/USD towards fresh new lows. Only the USDX’s sharp drop will announce the EUR/USD rally.

Ive added the EUR/USD H4 chart to show you better why the pair is still bearish in the short term. EUR/USD has confirmed the minor Head&Shoulders pattern on Friday, the price has retested the 1.1240 and R1 (1.1243) level and now it has made another lower low signaling that the bearish movement will continue.

The H&S reversal pattern has confirmed a potentially significant drop towards the 61.8% retracement level, near the PP (1.1005) level. The downside movement will remain intact as long as the price is traded below the minor black downtrend line.

The next downside target is seen at the 38.2% retracement level, a valid breakdown below this static support will open the door for a larger drop. A further decline could be invalidated by a valid breakout above the minor downtrend line.

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