This pair is trading into a down trend on Monthly chart, actually the price is moving inside a descending channel. The rate has tested the resistance of this channel twice in this spring but was unable to break above. Moreover the price has began an aggressive downward movement, the outlook remain negative for the Euro, I’m expecting to see new lows further.
This pair is under selling pressure, the price is now below 1.3000, this was a psychological level. As you can see on the Monthly chart we don’t have any recovery signals although the price has reached an important support zone. The rate is also below the 38.2% retracement level, this is another bearish signal. The stochastic indicator is showing a oversold market but until we have other bullish signals this pair will continue to fall.
The perspectives of EUR/USD remain bearish on long term, the first target is now at the 50% retracement level, we also have the previous two lows around this level. This is a major support area because the price was unable to close below this zone since 2005. The resistance could be found at the 38.2% retracement level and also at downtrend resistance line.
We could say that we have a range on monthly chart and now the price is moving towards the support at this sideways movement.
To see the price movement more accurate I’ve added the Weekly Chart, on this chart you can see all important levels of support and resistance. The pair was into a correction after the last downward movement. You see that the price correction reached the 61.8% retracement level, the Fibonacci level coincides with the Monthly resistance line.
From technical viewpoint, the decline from 1.3992 was expected, if you take a closer look at the Weekly chart you see that we had a Rising Wedge, the price broke down this pattern somewhere around of 1.353 level, also has managed to fall below the 50% retracement level (the Fibonacci was drawn on the last descending swing). The target of this pattern is at more than 900 pips (the target could be found around the 1.26 level), so the EUR/USD pair still has bearish potential.
The price is trading above the 23.6% level, here is a support level but most likely the price will decline below this level. If the price will find support here, then we’ll have a correction at this downward movement because we didn't have one since the price has escaped from the Rising Wedge. If the support from 1.2721 will be strong enough we could see a pull back, the price will try to test the descending trendline and also the 38.2% retracement level from Monthly chart. Any candle that will close below the 23.6% retracement level will give fuel to this bearish movement.
Fundamentally, the decline of this pair is also due to the recovery signs from the US economy, we have a very strong US Dollar lately. Mario Draghi said that the Euro zone needs more stimulus, and the ECB is ready to do anything is necessary, so the Central Bank has decreased the interest rate from 0.25% to 0.05% in September. The interest rate is at a historically minimum, the ECB also announced a QE program, we`ll see more details in October.
The US Gross Domestic Product rose at a 4,2% percent annualized rate, the forecast was 4,0%. Jobless claims are near to the lowest levels since 2007 thanks to labor market improvements. The strong data from United States confirmed Federal Reserve Chairwomen Janet Yellen’s speech at Jackson Hole symposium, she said that the U.S. economy is recovering and the labor market is improving, she also said that the Federal Reserve could rise the interest rate in 2015 or even sooner.