EURUSD had lost its positive momentum over the previous two weeks, after the bounce off the 1.1800 psychological level, challenging a new seven-month low of 1.1460. The neutral trend in short-term though could stay in place given that prices continue to fluctuate within the inverse head and shoulders pattern with neckline 1.1800 and head 1.1300.
From the technical point of view, in the daily timeframe, the RSI indicator is sloping slightly to the downside below the threshold of 50, suggesting that a low momentum price action would follow. The MACD oscillator is falling below the trigger and zero lines, confirming the recent negative structure.
Another extension to the downside below the 1.1460 support and the 50.0% Fibonacci retracement level of the upleg from 1.0340 to 1.2550, near 1.1450, could push the price towards the 1.1300 handle, identified by the doji candle on August 15. A significant step lower could bring the bearish sentiment into play again, sending the price probably until the 61.8% Fibonacci of 1.1185.
A reversal to the upside, however, could find immediate supports at the 40- and then at 20-simple moving averages (SMAs) around 1.1600 and 1.1640 at the time of writing. If the latter levels fail to halt bullish movements, the next target could be at the 38.2% Fibonacci of 1.1710. Moreover, further gains could send prices until the 1.1800 – 1.1840 resistance zone.
Regarding to the longer-timeframe, euro/dollar has been trading within an inverse head and shoulders pattern with left shoulder at 1.1530, right shoulder at 1.1460, neck line at 1.1800 and head at 1.1300 since June. A climb above the neckline would confirm the scenario for a reversal of the bearish structure in the medium-term.