EUR/USD plunges and it could signal another important drop. USD has taken the lead and it drives the pair lower as the USDX has found strong support and now is rallying. Technically, the EUR/USD increase was somehow natural after the false breakdown below 1.0777 static support.
The dollar was boosted by the ISM Manufacturing PMI release, the indicator has come in better than expected on Friday, it was reported at 41.5 points, above the 36.7 estimates. The Construction Spending, Wards Total Vehicle Sales, and the ISM Manufacturing Sales have reported good figures as well despite the COVID-19 crisis.
It is premature to talk about a larger drop as long as the price is trapped between the 1.1 - 1.0777 levels. EUR/USD is trading sideways on the Daily chart, so only a decrease followed by a valid breakdown below the 1.0777 static support will validate a major drop.
The pair has failed to retest the median line (ML) signaling a potential sharp drop towards the lower median line (LML). EUR/USD has registered only a false breakout above the 1.1000 psychological level. I've said in my previous analysis that EUR/USD is still under pressure as long as it is traded below the median line (ML) of the descending pitchfork.
- EUR/USD TRADING TIPS
We can talk about a buying opportunity only if the price makes a valid breakout above the median line (ML) and above the 1.1 level. EUR/USD could drop at least till the 1.0777 level if the price makes a bearish engulfing today.
EUR/USD should drop further if the USDX extends its gains in the short term. A larger drop could be validated if the price makes a valid breakdown below the 1.0777 static support. The major support remains at the 1.0653 and at the lower median line (LML) of the descending pitchfork.
Personally, I would like to see another false breakout with great separation, rejection, above the median line (ML) to be sure that EUR/USD will register a broader drop in the upcoming period, the current decrease could be only a temporary one, that's why I need a confirmation.
