EUR/USD rallied after the false breakdown below the 1.1000 psychological level and now has reached the major resistance area between the 1.1084 - 1.1111 levels. Technically, the outlook is still bearish as long as the price stays below the 1.1111 level, below the warning line (WL1) and within the descending pitchfork's body (below the uml).
We'll have a long opportunity if the price makes a valid breakout above the 1.1111 level, the first upside target will be at the 1.1200 psychological level. EUR/USD increased as the USD was punished by some poor data in the previous week. Unfortunately, the USDX wasn't able to hold above the 98.00 level, the aggressive drop has sent the EUR/USD pair towards the actual levels.
The US ISM Final Manufacturing PMI is expected to increase from 47.2 to 48.5 points, while the Final Manufacturing PMI could remain steady at 51.7. You should know that some poor data from the US and good eurozone manufacturing PMIs could force EUR/USD to jump higher in the short term.
- Trading Recommendation
I really believe that a good trading opportunity will appear soon because the price is trading near a major resistance area. EUR/USD will resume the upside momentum, if it manages to register a valid breakout above the upper median line (uml) and most importantly, above the 1.1111 static resistance. The target is seen at the 1.1200 - 1.1215 area.
EUR/USD could drop again and it could reach fresh new lows if this rebound is considered as a retest. The price has failed to stabilize below the median line (ml) of the descending pitchfork, I've said in the previous week that we may have a potential rebound towards the WL1 and towards the upper median line (uml) if the price comes back above the median line (ml) and if it stays above the 1.1 level.
If the pair is rejected from this resistance area which is bearish engulfing of a pin bar, EUR/USD will be able to approach again the 1.1 level as long as it stays within the descending pitchfork's body. Only a valid breakdown below the 1.1000 level and below the 250% Fibonacci line will signal a broader drop.
