Are EURUSD bears waking from their slumber?

The EURUSD currency pair on the D1 time frame was in a lengthy uptrend until a last higher top formed at 1.10329 on 2 February. The bears found price attractive at those levels and supply started overcoming demand.

A closer look at the Momentum Oscillator reveals negative divergence between point “a” and “b” when comparing the tops at 1.09294 and 1.10329. This should have alerted technical traders that the bullish momentum could be fading.

After the higher top at 1.10329, the price crashed through the 15 and 34 Simple Moving Averages and  the Momentum Oscillator followed suit and broke through the 100 baseline into bearish terrain. In the process a weekly support level was breached as well.

A possible critical support level formed when a lower bottom was recorded on 13 February at 1.06555. The bulls drove the price higher but encountered the weekly support now turned resistance level and a lower top formed on 14 February at 1.08045.

If the EURUSD breaks through the critical support level at 1.06555, then three possible price targets may be reached from there. Attaching the Fibonacci tool to the lower bottom at 1.06555 and dragging it to the resistance level at 1.08045, the following targets can be calculated:

• The first target may be estimated at 1.05634 (161.8%).
   
• The second price target might be expected at 1.04144 (261.8%)
   
• The third and final target might be estimated at 1.01733 (423.6%).

If the resistance level at 1.08045 is broken, the current scenario is not valid any longer.

As long as the bears continue to dominate the market, the outlook for the EURUSD currency pair should remain bearish.