EUR/USD remains trading in a narrow range with downside potential in the short term
ANALYSIS | 6/8/2022 12:10:43 PM GMT
- The EUR/USD pair consists of a head and shoulders formation, sending a downside signal
- The Moving Average of 21 crosses below the 50 period on the 4-hour chart
- The momentum oscillator’s relative strength index (RSI) stands in the neutral zone with light ascending upside momentum.
The EUR/USD edged higher in the initial European session. The major pair was trading in a narrow range after failing to sustain the ascending trend on Monday. At press time, EUR/USD was trading at 1.0705, up +0.00060 on a daily basis.
The European major pair consolidates in a narrow range since it couldn’t breach the 1.0757 resistance level on Monday. The previously mentioned resistance level stance has prevented the EUR/USD from further gains. Furthermore, market participants witnessed a slip in the euro towards the 1.0653 level yesterday before rebounding towards the critical resistance level of 1.0705.
This outlook relies on a four-hour timeframe
However, on the four-hour chart, the EUR/USD pair consists of a head and shoulders formation, which is usually followed by a bearish trend. On the other hand, the moving average of 21 crosses below the 50-period moving average, which keeps the downside more likely to occur in the current technical outlook. Meanwhile, the RSI remains trading in a natural zone, recording 44.22 on the value line, lacking in gain momentum where it shows slightly ascending upside momentum.
EUR/USD encounters a critical resistance level around 1.0708. If the candlestick for the 4-hour closes below the previously mentioned level, we may see EUR/USD tumble towards 1.0678, close to the intraday low. A successful breach of that level would pave the way towards yesterday’s low levels of 1.0653, followed by the 1.0643 support level. Last but not least, if the 4-hour candlestick closes below the 1.0643 level, we may be back to the first of June low levels of 1.0627.
Alternatively, if the European currency could decisively breach the 1.0708 level, that would set the stage for retesting the 1.0757 level. Additionally, further gains for the pair are likely if the price decisively breaks the 1.0757 level, which may bring the 1.0787 high of May.