Baxia Markets
February 14, 2024

Bearish Trend Continues: EURUSD Finds Resistance at Bollinger Bands Amid Volatility Contraction!

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The EURUSD currency pair has recently experienced a significant drop, breaking through its ascending trendline. This movement occurred in response to the release of US Consumer Price Index (CPI) data, which surpassed economists' forecasts, sparking a shift in market sentiment towards the US dollar.

Technical analysis reveals several key indicators pointing towards a continuation of this downward trend. Firstly, the Exponential Moving Averages (EMA) 50 and 200 are showing an increasing distance between them. This widening gap suggests that the bearish momentum in the EURUSD pair is strong and likely to persist in the near term.
Bearish Trend Continues: EURUSD Finds Resistance at Bollinger Bands Amid Volatility Contraction!
Following yesterday's drop of about 90 pips, today we observe the Bollinger Bands contracting. This contraction indicates that the market is taking a short pause from the selling pressure, potentially signaling a temporary respite in the downward movement.

In terms of key resistance levels, traders should pay attention to the middle band and the upper band of the Bollinger Bands. A break above the upper band could indicate that selling pressure is easing. However, if there's no break above these levels within the next 4 or 8 trading hours, it is likely that prices will continue to move lower.

Furthermore, technical oscillators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) histogram provide additional insights. The RSI has dipped into oversold territory and bounced back, indicating that a support level may be nearby. Similarly, the MACD histogram has crossed above the signal line, coinciding with the contraction of the Bollinger Bands, suggesting that the market is taking a break from selling pressure.

In summary, the overall outlook for EURUSD remains bearish, with the market taking a temporary break from the recent downward movement. However, given the strong bearish momentum indicated by the widening gap between EMAs and the lack of significant bullish signals, there's still a likelihood that prices will continue to move lower in the near term.

Key Takeaways:

1. EURUSD dropped after US CPI beat economist forecasts, breaking the ascending trendline.
2. EMA 50 and 200 are widening, indicating strong bearish momentum.
3. Bollinger Bands are contracting, signaling a temporary pause in selling pressure.
4. Key resistance levels are the middle and upper bands of the Bollinger Bands.
5. RSI dipped into oversold territory and bounced back, suggesting potential support nearby.
6. MACD histogram crossed above the signal line, but overall market sentiment remains bearish.


Key Economic Releases to Watch Today

GBP, CPI (YoY) (Jan)

Actual 4.0% Forecast 4.1% vs Previous 4.0%


Forecast 1.1% vs Previous 1.3%

USD,  Crude Oil Inventories

Forecast 3.300 vs Previous 5.521



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