After selling off in the past few days, EURUSD is making a correction to the 38.2% Fibonacci retracement level. 

This coincides with a broken support level around the 1.0950 minor psychological level and the 200 SMA resistance, which could allow the downtrend to resume.

Stochastic is pointing down, confirming that selling pressure is present. RSI is also turning from the overbought zone, signaling a potential pickup in bearish momentum. These could take EURUSD down to the previous lows at the 1.0800 mark or lower.

Note that the 100 SMA is moving farther away from the 200 SMA, indicating that the downtrend is about to get stronger. This could lead to the creation of new lows, possibly around 1.0700 or lower if euro bears jump into action.

There are no major reports lined up from the euro zone or the US economy today, which suggests that risk sentiment could be the main driver of price action. This could mean that the ongoing downtrend for EURUSD might resume sooner or later.

Keep in mind that the pair has previously formed a double top on its longer-term time frames, signaling the possibility of a selloff as soon as price breaks below the neckline around the 1.0800 mark. This could then take EURUSD to the lows around 1.0500 earlier this year.

Fed rate hike expectations for the end of the year could keep the US dollar supported against its peers in the long run, as strong figures from the US economy might continue to keep this view valid. For today, US existing home sales data is up for release and an increase from 5.35M to 5.40M is expected.

Tomorrow has the Spanish unemployment change report on tap, along with the euro zone consumer confidence index. On Friday, PMI readings from Germany and France are lined up, along with the US flash manufacturing PMI and new home sales figures.

By Kate Curtis from Trader’s Way