EUR/USD looks oversold. Nonetheless, economists at TD Securities are skeptical that the downside should be faded with the 100 and 200-day moving average crossover near.
Technical showdown
“Last week, we had thought we may have marked a near-term low last week ahead of NFP, but this now looks to be in a bit of trouble, particularly as the 100 and 200-DMA crossover is at risk of emerging in the coming days. Historically, the crossover has been a solid technical barometer for the pair that foreshadows future momentum.”
“The last time the 100-DMA crossed below the 200-DMA was in July 2018 when the pair essentially ground from ~1.20 to ~1.08 in 2020. Over the last 15 years, the crossover has occurred 15 times; 12 of those have produced notable gains/losses.”
“We are cognizant that other technical indicators suggest that the pair is a bit oversold near 1.18, but with positioning where it is and summer liquidity potentially at play, we require a bit more convincing that dips should be faded.”
“Good support may be seen around 1.1785 and 1.1760 ahead of the late March lows just above 1.1700.”