EURUSD could not sustain last week’s bullish breakout above the restrictive 20-day simple moving average (SMA), pulling back into the 1.1200 area on Monday.
Downside risks are now on the table again as the RSI is drifting lower in the bearish zone, and the Stochastics are pointing downwards. Yet, the increasing positive momentum in the MACD signals that the bulls may not abandon the battle unless the price closes clearly below the 20-day SMA and the 1.1260 level.
Should the bears pierce the 1.1260 boundary instead, all eyes will turn back to the 1.1180 floor. This is where the 61.8% Fibonacci retracement of the 2020 upleg (1.0636 – 1.2348) happens to be. Therefore, any extension lower could press the price aggressively towards the 1.1000 psychological mark and the 78.6% Fibonacci, strengthening the bearish outlook in the medium-term picture.
Alternatively, if the pair manages to return above the 20-day SMA, the bulls may attempt to pierce the 1.1370 barrier and crawl up to the 50-day SMA at 1.1460. Slightly higher, the descending trendline and the 50% Fibonacci of 1.492 could prove to be a tougher obstacle. Should buying forces knock down that wall, raising the odds for further recovery in the market, the next stop could be around the 1.1600 number.
Summarizing, although the short-term outlook for EURUSD is still looking fragile, hopes for an upside reversal remain alive as long as the price keeps some foothold around the 20-day SMA.
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