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Summary: The EURUSD has fallen below 1.06, the first time since March 16, with a 0.45% intraday decline. The declining 50-day SMA is approaching the 200-day SMA, setting the stage for a death cross.

Fundamentals

In early trading on Monday, the US Dollar Index remained strong. The closing price last week, above the key level (38.2% Fibonacci retracement of the downtrend from 114.72 to 99.20) at 105.13, has generated strong bullish signals.

The US Dollar's rise last week marked the index's tenth consecutive weekly gain, and it is poised to achieve a second consecutive monthly bullish close. This adds to the reversal signals forming on a larger time frame, indicating further upside in the coming days.

Furthermore, as the market bets on the European Central Bank not raising interest rates in the future, hedge funds have increased their short positions on the Euro to near one-year highs.

According to data from the Commodity Futures Trading Commission, leveraged investors' net short positions on the Euro increased to 23,306 contracts in the week ending September 19, the highest level since October 11.

Europe is grappling with sluggish growth and persistently high inflation, while the US is enjoying above-trend growth with support from strong consumers. The Fed's policy during this period is bolstering the US Dollar, and we anticipate the Euro will continue to be under pressure over the next six months.

Technical Analysis

EURUSD has been unable to stage a new rally after failing to break through 1.0750 in recent trading. It has subsequently broken below the 1.0700, 1.0650, and 1.0600 levels, further entering bearish territory. Short-term oscillators indicate the potential for more losses.

Looking at the 4-hour chart, new multi-week lows are forming as the asset consolidates its downward momentum. If bears push prices lower, the first obstacle they may need to overcome is the 5-month low of 1.0516. Beyond this level, the path could be cleared for a move toward the January low at 1.0481. If that level continues to crumble, prices may slide toward the support zone of November 2022 at 1.0222.

On the other hand, if the asset reverses higher, the initial upside may encounter resistance around the recent resistance zone of 1.0617. However, further upward momentum is not expected as the asset is currently in a downtrend.

Overall, the asset appears to be caught in a steep downward trend as bullish momentum wanes. However, the situation could worsen if a death cross forms between the 50-day and 200-day SMAs. In terms of trading strategy, going short at highs is recommended as the primary approach.

Trading Recommendations

Trading Direction: Short

Entry Price: 1.0640

Target Price: 1.0496

Stop Loss: 1.0720

Valid Until: 2023-10-09 23:55:00

Support: 1.0552, 1.0517, 1.0481

Resistance: 1.0617, 1.0676, 1.0718