EURUSD may be on the decline again having consolidated since Friday’s sell-off on the back of the surprisingly strong US jobs report.
A flag formation followed Friday’s selling and it appears the trend line support has now been broken which could now see 1.07 come under pressure again.
This pair has experienced a lot of selling over the last few weeks since the FOMC dropped a strong hint that it could raise interest rates at its December meeting. With the markets having largely priced this in now, the bulk of the short-term selling may now have already happened and further declines may not quite have the vigour that previous ones have.
With that in mind, it should be noted that we appear to be seeing a divergence on the 4-hour chart between price action and the stochastic. While that in itself doesn’t mean we’re going to see a reversal to the upside, it does suggest momentum is being lost and the trend may be exhausting. A larger correction may therefore be approaching in the pair.
If we do see a break of Friday’s lows – around 1.07 – 1.0650 could offer support for the pair having briefly done so back in April. Beyond this, 1.0520 – 13 April lows – could offer further support.
As you can see below, OANDA clients are split on whether 1.07 is going to be a new low for the pair or further declines could come. Clearly though, 1.07 is a key level of interest and open orders are roughly split between buyers and sellers, with sellers appearing to slightly edge it.