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FX analysis

The downtrend on EURUSD – is there more to come?

April has seen the price of EURUSD sink below the lows set in March and continue on its downward trajectory, despite a bullish end to last month. As price heads down towards a major support level at 1.0500 (shown on the monthly timeframe below) this move could continue to yield some selling opportunities for trend traders, on the daily timeframe as well as on an intraday basis.

A look at the weekly timeframe below reveals a minor support level at 1.0800, which price has recently broken through. On this timeframe, lower highs and lower lows in price action can be more seen, showing the current downtrend. Bearish moving average (MA) geometry is evident, with the 10, 20 and 50 MAs in the correct order and pointing downwards in the direction of the downtrend. There is bearish convergence between price action and the MACD and RSI indicators, suggesting there could be strong momentum to the downside.

On the daily chart below, the 10, 20, 50 and 200 MAs are aligned and showing good bearish geometry, and again the MACD and RSI indicators are converging with the lower highs and lower lows in price action, suggesting momentum to the downside. A trend trading opportunity could occur if price pulls back up to the sell zone in and around the 10 and 20 MAs, and a small or medium sized bearish candle prints in this area. It could be especially advantageous if the pullback coincides with the aforementioned horizontal level at 1.0800

Moving down to the four-hourly timeframe below, the downtrend is established, with lower highs and lower lows in price action, and the 10, 20, 50 and 200 MAs lined up and showing bearish geometry. Again the MACD and RSI indicators are showing bearish convergence, which may suggest a continuation of the downtrend could be possible. A pullback up to the MA sell zone, and a small to medium sized bearish candle printing in this area could indicate the beginning of a further move down and may offer a higher reward to risk opportunity than trading on the daily timeframe.

The horizontal support level at 1.0500 could hold strongly since price has not spent any considerable time below here since 2003, and it could therefore provide a sensible area to take profit.

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