The Euro is pulling off some confusing price action. Despite an expected rate hike later this week, the pair is actively losing support and breaking down from the range which has held for two months.
EUR/USD on the Daily Timeframe
Looking just at the technicals, this seems like a chart that wants to go down. Price did a textbook example of a range breakdown, where it spent a lot of time at the lower end, before finally cleanly breaking down in one single range.
Now price seems set to test the underside of what was first support, and should now be strong resistance. However, this picture completely conflicts with the expected rate hike later this week, especially as the Fed is strongly expected to hold rates.
The question is thus that of whether the fundamentals or the technicals will win out. If the fundamentals were to win out, we’d want to see price regain this support area fairly quickly, at which point the failed breakdown would be a strong bullish sign, that could look something akin to the following:
EUR/USD on the 4-hour Timeframe