How Low Could EUR/USD Go?

Yesterday, EUR/USD verified the breakdown under the upper border of the trend channel and declined, closing the day below the early August peak. What does it mean for the exchange rate?

EUR/USD

On Tuesday, we wrote the following:

(…) on the long-term chart, we see that EUR/USD is still trading in the orange resistance zone. Additionally, indicators increased to the highest levels since April 2014. Back then, such high readings of the CCI and Stochastic Oscillator preceded bigger move to the downside, which suggests that we may see a similar price action in the coming week(s).

(…) on the medium-term chart (….), we can see that the CCI and Stochastic Oscillator already generated the sell signals, supporting currency bears. (…) we also see that the exchange rate is quite close to invalidating the earlier breakout above the 127.2% Fibonacci extension.

On top of that, (…), EUR/USD slipped below the upper border of the brown rising trend channel, invalidating the earlier breakout.

(…) the pair rebounded slightly, but taking into account all the above-mentioned factors and the sell signals generated by the daily indicators, we think that it’s nothing more than a verification of yesterday’s breakdown. If this is the case, we’ll see reversal and further deterioration in the very near future.

From today’s point of view, we see that the situation developed in line with the above scenario and EUR/USD declined after the verification of the earlier breakdown under the upper border of the brown rising trend channel marked on the daily chart. Thanks to yesterday’s drop the pair also slipped below the early August high and the 127.1% Fibonacci extension, invalidating the breakouts (additional bearish developments). Taking these facts into account and combining them with the current position of the monthly weekly and daily indicators, we believe that further deterioration is just around the corner. Therefore, if the pair extends losses from today’s levels, the next target for currency bears will be the lower border of the brown rising trend channel (currently around 1.1810). If this support is broken, the way to lower levels will be open.