EURUSD – daily chart points to persisting downside risk

EURUSD edged higher in early Monday, driven by fresh risk appetite, after Friday’s US labor data signaled that the Fed might be done with hiking interest rates.

Fresh gains emerge after a multiple failure to register clear break through Fibo support at 1.0786 (76.4% of 1.0635/1.1275) and facing a minimum requirement in clearing 200DMA (1.0817) to ease existing downside risk and to allow for stronger recovery.

Near-term action remains within the range, limited at the upside by 100DMA (bull-trap) and weighed by thick daily cloud, base of which lays just above the range tops, while Fibo support keeps so far the downside protected.

Technical signals are mixed, as daily studies remain in bearish setup and keep in play risk of bearish continuation through 1.0786 pivot towards targets at 1.0700 (psychological) and 1.0635 (May 31 low).

On the other hand, initial bullish signal is developing on weekly chart (last week’s inverted hammer candle, 14-w momentum broke into positive territory and stochastic is oversold) which keeps alive expectations for stronger advance.

Break of 200DMA to expose 1.0875/86 (20DMA /Fibo 23.6% of 1.1275/1.0766 bear-leg), with extension above 1.0945/60 (Aug 30 recovery top / Fibo 38.2%) needed to signal reversal.

Otherwise, limited recovery (extended upticks to be capped under falling 20DMA) would offer better levels to re-enter larger downtrend.

Res: 1.0817; 1.0834; 1.0875; 1.0945
Sup: 1.0766; 1.0700; 1.0667; 1.0635