EUR/USD Forecast: never ending free-fall

17 January 2015, 13:47
Andrius Kulvinskas
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Astonished, shocked, broken. I guess those words are in many mouths this Friday after the latest market developments. I also guess everyone is still talking about the SNB and the troubled brokers. In the meantime, the EUR/USD extends its decline below the 1.1500 level, levels not seen since November 2003, in a free-fall that has so far accumulated 2,600 pips in 8 months. 

The technical picture shows extreme oversold conditions all over the different time frames, and yet, there are no signs the pair may find a bottom anytime soon. In the weekly chart, RSI resumed its slide, gathering downward momentum around 18, while momentum indicator lacks directional strength flat below 100 as per reflecting the latest weekly opening. In the daily chart however, indicators head straight south in extreme oversold levels, with RSI at 17. Moving averages in both time frames are way too far to even consider pullbacks for the upcoming days.

So can this never ending slide extend even further? Will depend on the ECB next Thursday, but indeed, the pair seems to be heading towards its next strong static support around 1.1360, where it presents several weekly and monthly lows. If the level gives up, 1.10 comes as next logical target (and believe me, I can’t believe I have just said “1.10”).

To the upside, 1.1600 comes as the immediate natural resistance level, with a break above signaling a probable recovery up to 1.1750. The bearish trend however, will remain well in place even if the recovery extends up to 1.20, something hardly seen at the time being.
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