Hangs near two-month low, bears have the upper hand below 200-day SMA

• EUR/USD meets with fresh supply on Tuesday and is weighed down by a modest USD uptick.
• The technical setup suggests that the path of least resistance for spot prices is to the downside.
• Attempted recovery might still be seen as a selling opportunity and is likely to remain capped.

The EUR/USD pair struggles to capitalize on the previous day’s modest gains and attracts fresh sellers in the vicinity of the 1.0800 round-figure mark during the Asian session on Tuesday. Spot prices, meanwhile, remain well within the striking distance of over a two-month low, around the 1.0765 region touched in July and seem vulnerable below a technically significant 200-day Simple Moving Average (SMA).

The negative outlook for the EUR/USD pair is reinforced by the fact that oscillators on the daily chart are holding deep in the bearish territory and are still far from being in the oversold zone. Apart from this, the emergence of some US Dollar (USD) buying suggests that the path of least resistance for spot prices is to the downside. Hence, a subsequent slide to the 1.0765 region, en route to the 1.0700 mark, looks like a distinct possibility.

The next relevant support is pegged near the May monthly swing low, around the 1.0635 region. This is followed by the 1.0600 round figure, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. The EUR/USD pair might then turn vulnerable and accelerate the fall towards the 1.0530-1.0525 intermediate support before eventually dropping to the 1.0500 psychological mark.

On the flip side, recovery above the 1.0800 level is likely to confront stiff resistance near the 200-day SMA, currently around the 1.0815-1.0820 region. A sustained strength beyond might trigger a short-covering rally and allow the EUR/USD pair to reclaim the 1.0900 round-figure mark. Any subsequent move up, however, might still be seen as a selling opportunity and remain capped near last week’s swing high, around the 1.0840-1.0845 zone.

The latter should act as a pivotal point for the EUR/USD pair, which if cleared decisively will suggest that the recent sharp pullback from the 1.1275 region, or a 17-month peak touched in July has run its course. This, in turn, will set the stage for some meaningful near-term appreciating move.

EUR/USD daily chart

Technical levels to watch