Death cross warning adds another worry to Euro outlook
For technical analysts watching EUR/USD, an important and potentially bearish chart formation just happened on the daily chart: A “death cross.”
The formation could signal further losses ahead. Technical analysts use the term “death cross” to describe when a short-term moving average crosses below a long-term average, signalling a change in price momentum. The 50-and 200-day combination often attracts the most attention.
Thursday’s price action delivered the signal with EUR/USD’s 50-day moving average falling below its 200-day moving average, EBS prices.
The warning comes as EUR/USD attempts to base in the mid-1.17s and counter trend trades might look attractive. However, with bearish risk increasing, corrective action within the late June-July bear trend might be limited.
Fibonacci levels taken off the longer-term euro fall, 1.2266 to 1.1752 between May 25 and July 21, give a minimum correction of 1.1873 and a potential bull trigger at 1.2009, 23.6% and 50% retracements respectively.
If the “death cross” signal holds, downside targets are at 1.1704, 2021 low, 1.1602 November 2020 low and 200 week moving average at 1.1575.
Source: Reuters (Reporting by Peter Stoneham)