Sell-Off Has Room to Run Before Reboun

The EUR/USD rose and reached a high of 1.1097, the highest point since April 1 this year. 

• Sell the EUR/USD pair and set a take-profit at 1.0750.
• Add a stop-loss at 1.0945.
• Timeline: 1 day.

• Set a buy-stop at 1.0900 and a take-profit at 1.100.
• Add a stop-loss at 1.0800.

The EUR/USD exchange rate continued its bearish trend, helped by the strong US dollar. It fell to a low of 1.0847, the lowest point since April 10th. The pair has dropped by over 2.20% from its highest point in April this year.

The main focus among investors is the ongoing budget ceiling issue in the United States. In a sign of hope, the head of the National Economic Council, Lael Brainard, said that talks between Democrats and Republicans were going on well. This is a signal that the two sides will reach a deal that will see the US avoid a default.

The key EUR/USD news on Monday will be the upcoming EU economic forecasts report by the European Commission. Analysts believe that the commission will upgrade its economic forecast for the region. Europe is benefiting from low natural gas prices and a stronger euro.

The other key data to watch will be the bloc’s industrial production and Spanish consumer confidence. Europe will publish the final consumer price index (CPI) on Wednesday. In the US, several Fed officials are set to speak in the next few days.

The EUR/USD rose and reached a high of 1.1097, the highest point since April 1 this year. At its peak, the pair was up by ~16.47% from the lowest level this year. It has now pulled back and moved slightly below the 50% Fibonacci Retracement level.

In addition, it has dropped below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point at 50. Therefore, the pair has more room to drop before the bears capitulate. If this happens, the capitulation will happen at 1.0700, which is slightly above the 38.2% retracement point.

The EUR/USD pair has been in a strong bearish trend in the past few days. It managed to cross the key support level at 1.0945, the lowest point on 1.0800, and the lowest point on May 2. The par has also retreated below the 25-period moving average and is at the lowest side of the Bollinger Bands.

Before the current retreat, the pair had formed a triple-top pattern, which is a bearish sign. Therefore, the pair has some more bearish room to run, with the next reference level being at 1.0750.

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