Hello, dear traders. Today we are going to analyze the Euro against the US dollar forex pair. As we can see at the price chart the currency pair is in a down trend as indicated by the declining trend line. Moreover, the Simple Moving averages are above the prices adding to the selling pressure. In the recent term, the currency pair declined to fresh 14-month low at 1.2835. The lower Bollinger band was breached indicating that the downside bias was strong while in the last trading session prices have been in consolidation. Nevertheless, the prices are near a long term low at a 2-year bottom at 1.2770 and the downward wave started from 1.3978 and extended to 1.2835 that creates concerns that is overextended. Fundamentals on the other hand are strongly bearish to the Euro.
Furthermore, at the below chart we can see the daily volumes of futures and options traded on the Chicago Mercantile Exchange. We can see that since September the 10th the volume has been diminishing while the EURUSD prices dropped to the 1.2835. The volume of trading provides a warning in this case that the bears are weakening and we might be near a potential reversal point.
Looking at the oscillators, we observe a very interesting thing which adds to the warning of the volume. The Stochastic is in neutral zone and normally would not be informative at all, however we said that prices dropped to fresh low but Stochastic did not follow. The same is observed with the longer term indicator, the RSI (14), creating a bullish divergence. At the same time the OsMA is above zero and gradually advancing. Based on this analysis, our opinion is favoring an upside scenario. The EURUSD could reverse at this point and start a correction in the following week. Prices could test initially resistance at 1.2974 ahead of the 38.2% of 1.3413 to 1.2835, at 1.3057.
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