EUR/USD was rejected by the 1.1000 psychological level and now is trying to jump higher on the short term. The outlook is still bearish despite a minor rebound, the price is trapped below some important resistance levels.
The poor US data have weakened the dollar, but I believe that some good numbers today could send EURUSD lower again. Personal Income and Personal Spending are expected to increase by 0.3%, while the Chicago PMI could remain steady at 48.9 points. The Euro-zone economic data will play an important role as well.
EUR/USD has registered only a false breakdown below the 1.1000 psychological level, so the minor rebound is somehow expected on the short term. The US Dollar Index has failed to stabilize above the 98.00 level, a potential drop (correction) on USDX will send EUR/USD way higher.
As I've said in the previous analysis, a broader drop will be confirmed only by a valid breakdown below the 1.1 level. The price has failed to stay below the median line (ml) of the descending pitchfork signaling an oversold. EUR/USD could be attracted by the upper median line (uml) of the descending pitchfork as long as the price is trading above 1.1 and above the median line (ml).
Technically, EURUSD is still expected to drop much deeper in the upcoming period after the breakdown from the ascending channel, between the LML and the WL1. A minor rebound could validate the breakdown and could really signal a larger correction. I believe that EURUS could turn bullish again only from above 1.1111 static resistance.
- Conclusion and Trading Recommendation
A minor rebound could be natural after the last drop, the price could come back to retest the WL1, the 1.1084 level and the upper median line (uml) before it will resume the downside movement. EUR/USD could drop anytime, so you should be careful and you should consider this rebound as an opportunity to go short again.
Personally, I'm expecting the price to reach the 250% Fibonacci line (ascending dotted line) in the upcoming days, a valid breakdown below this dynamic support and below the 1.1 will attract more sellers, the WL2 could represent the next downside target.
