EURUSD has declined considerably after touching the 38.2% Fibonacci retracement level of the upleg from 1.0340 to 1.2550, near 1.1708. The pair remains neutral since the end of August, trading between 1.1530- 1.1720. In the short-term, consolidation is likely to stay in place as the RSI continues to move around its 50 neutral level and the MACD flattened around zero and its red trigger line. However, the 20-day simple moving average (SMA) posted a bullish cross with the 40-day SMA, indicating possible gains.
In the wake of negative pressures again, the market could meet support at the 40-SMA near 1.1585 before being able to challenge the lower band of the recent range at 1.1530. A close below this level could see a retest of the 50.0% Fibonacci mark around 1.1450, while in case of steeper declines, the 1.1300 psychological obstacle would increasingly come into scope.
On the flipside, as the pair stands above the SMAs a bullish tendency is possible towards the 1.1720 resistance level, near the 38.2% Fibonacci. A stronger barrier, though, could be found at the 1.1750 region, taken from the highs at the end of July. A violation of this point could increase chances for further gains probably until the 1.1840 hurdle.
To sum up, EURUSD’s bias is neutral in the short-term but in the medium-term the pair is ready to form an inverted head and shoulders pattern, with the neckline being the 1.1750 resistance. A jump above this region would endorse the case for a bullish correction.