EUR/USD Technical Analysis: Euro Rallies Within Downtrend, Will 1.1600 Be Tested?

• The Euro has rallied in the last few sessions as a strengthening USD pauses

• Euro downtrend is still intact with negative technical indicators remaining

• Significant technical levels are not far away, will they be tested？

EUR/USD TECHNICAL OUTLOOK

The Euro has found some support in the last few trading days but is still within a channel pointing lower. The US Dollar softening from its recent rise may explain part of the move. Since EUR/USD broke through the 200-day moving average, the downtrend has remained the prevalent direction. A bearish Death Cross was established when the 50-day moving average crossed under the 200-day line, underscoring downward momentum.

A continuation of the trend may see a test of the November 2020 low at 1.1600, which is also the neckline of a bearish Head and Shoulders pattern. The formation could be a powerful signal for a move if the Euro breaks the neckline. A break under 1.1600 could see prices attempt to follow the bearish trajectory of the formation. Taking the distance of the head (1.2350) to the neckline (1.1600), the implied outlook of the Head and Shoulders could see prices fall towards 1.0835. With that in mind, past performance is not indicative of future results.

In the bigger picture, EUR/USD made a high in January this year at 1.2350. Despite an attempt to rally in May, prices never threatened to claim higher ground. The resistance levels in the near term are at the most recent previous high at 1.1886, followed by the more significant break down point of 1.2090.Support remains at the neckline level from the previous low at 1.1600.