EUR/USD at the crossroads after the big fall

• The EUR/USD continues its downward march, falling to the lowest levels since January.
• The pair is nearing a critical confluence of top-tier technical levels.

The EUR/USD has reached a low of $1.2027, the lowest since January 12th. It fell below the April 27th low of $1.2055. The prominent driver is the US Dollar, which is strengthening across the board. The greenback continues enjoying elevated, albeit not rising US bond yields. Also, the rise of the Core PCE to 1.9% and the mediocre euro-zone data on Monday all weigh on the pair.

The moves are exacerbated by thin liquidity. Most European markets are off due to the Labor Day holiday. Trading conditions will improve later on as US traders start their day. The highlight of the US session is the ISM Manufacturing PMI for April, which is expected to drop from 59.3 to 58.4 points.

See:

• How to trade the US ISM Manufacturing PMI with EUR/USD
• ISM Manufacturing PMI Preview: USD may gain further especially if the inflation component continues shining

EUR/USD Technical Analysis

The pair’s decline has sent to flirt with oversold conditions: the RSI is close to the 30 level. Also, the closely watched 200-day Simple Moving Average comes out at $1.2011, close to the fresh low of $1.2027 and the round level of $1.2000.

Will the mix of these two critical levels and oversold conditions send the pair bouncing back up? Or will thin liquidity and the strong momentum that the US Dollar enjoys be sending the EUR/USD over the line?  The pair is at the crossroads.

Below $1.2000, the $1.2920 was a low point in early January and is worth watching. Even lower $1.1825 was a swing low in December and is next in line.

Looking up, the previous low of $1.2055 is now resistance. It is followed by the 2017  peak of $1.2090 and the March 1st trough of $1.2155.

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