After a sharp post-breakout increase on Monday, we saw even sharper decline during yesterday’s session. Thanks to the currency bears’ attack the euro moved lower against the greenback, which gave the sellers another ally. Will we see EUR/USD under 1.2200 in the coming week?

EUR/USD Invalidated Breakout

Yesterday, we wrote that currency bears pushed EUR/USD lower (as we had expected) earlier today, which together with the sell signal generated by the indicators suggests further deterioration in the coming day(s).

From today’s point of view, we see that the situation developed in tune with our assumptions and EUR/USD moved sharply lower yesterday. Thanks to this drop, the pair slipped under the previously-broken upper border of the black declining trend channel and closed the day below it, invalidating the earlier breakout.

Earlier today, the exchange rate verified yesterday’s breakdown, which increases the probability of another move to the downside in the near future.

How low could EUR/USD go?

In our opinion, the initial downside target will be around 1.2173, where the38.2% Fibonacci retracement and the green support zone are. Nevertheless, taking into account yesterday’s price action, it seems that the pair could move even lower and test the lower border of the above-mentioned black declining trend channel (currently around 1.1998) in the following days.

USD/CAD Enriches Currency Bears

Looking at the medium-term chart, we see that although USD/CAD moved a bit higher earlier this week, the sell signals generated by the weekly indicators remain in the cards, supporting currency bears and lower values of the exchange rate.

What impact did the recent price action have on the very short-term chart? Let’s take a closer look at the daily charts below.