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  • Euro has suffered its weakest daily close in 34 months. 
  • Tuesday’s bearish marubozu candle suggests scope for further sell-off. 

EUR/USD closed out Tuesday below 1.07 to print the weakest daily close since April 2017. 

More importantly, the single currency formed a bearish marubozu candle, implying a continuation of the downtrend. A red maruzobu, the one with a large body and little or no shadows, occurs when sellers control the price throughout the day, and is considered very bearish. 

The back-to-back big red marubozu candles seen on the weekly chart are also painting a bearish picture. 

Therefore, the path of least resistance for the EUR is to the downside. While the 14-day relative strength index (RSI) is reporting oversold conditions, the 14-week is still biased bearish with a below-50 print. 

Also, the daily RSI can and does stay oversold for a prolonged period in a strong bearish market. The oversold signal would gain credence if and when signs of seller exhaustion emerge on the daily chart. 

So, as of now, there is room for deeper sell-off in the common currency. On the downside, support is seen at 1.0710 (February 2016 low). On the higher side, 1.0879 (September 2019 low) is the level to beat for the bulls. A break higher is needed to neutralize the bearish setup. 

At press time, EUR/USD is trading at 1.0798. 

Daily chart

Trend: Bearish

Technical levels

 

Expert score

5

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