EURUSD bears returned on Monday to fight for parity after taking a quick break on Friday, which helped the price close mildly positive. The pair has also charted a bullish hammer candlestick around its 20-year low of 1.0071 in the same day, though the encouraging formation is currently getting under scrutiny.
Oversold conditions are evident as the price has been testing the lower Bollinger band for a couple of sessions now. The RSI and the Stochastics are also reflecting an overstretched decline, as they keep fluctuating below their 30 and 20 levels accordingly. That said, neither of those indicators is showing any convincing signs for a bullish reversal, suggesting that a rebound in the price could take place somewhere lower.
Given the above discouraging signals and the negative trajectory in the simple moving average (SMAs), parity will be in sight in the short term if downside forces persist below the 1999 – 2002 constraining zone of 1.0133. Failure to rotate here could bring the tentative support line seen at 0.9955 and the 0.9900 psychological mark next on the radar, while even lower, the bears may push towards the 0.9700 base last seen during the second half of 2002.
On the upside, the bulls will need to reclaim the area between 1.0190 and 1.0275, where the constraining red Tenkan-sen line is also converging, to reach the 20-day simple moving average (SMA) and the 23.6% Fibonacci retracement of the 1.1494 – 1.0071 downleg at 1.0411. Above that, the spotlight will fall on the tough resistance trendline seen at 1.0585 and the 38.2% Fibonacci of 1.0618. Notably, the price will also meet the lower boundary of the Ichimoku cloud within the same region, which has been stubbornly blocking the way higher since the end of May. Beyond that, the recovery could stabilize around the surface of the cloud and the 50% Fibonacci of 1.0785.
All in all, the technical picture foresees more weakness for EURUSD in the short term, which is expected to result in parity, especially if the price fails to bounce above 1.01900 and closes below 1.0133 instead.
