During the European trading session, the EUR/USD trading pair experienced heavy selling and thus dropped below the 1.0850 price level.
According to analysts, the board strength of the USD against other currencies was the reason behind the weakness in the EUR/USD. In addition, the sour market mood is also affecting the positive sentiment of the European currency.
For now, the EUR and the USD trading pair are experiencing mild selling pressure. However, the daily chart of EUR/USD suggests that a major decline is also on the cards.
The EUR/USD is trading above all the important MA lines, but the 20 SMA, in particular, is showing signs of exhaustion. Considering how the 20 SMA represents the short-term trend, it means the EUR bulls are in trouble for the short term.
Despite all of this, the 20 SMA is still acting as dynamic support near the 1.0810 price level. Similarly, other important technical indicators are also coming out of the overbought territory.
And if we look at the 4-hr chart of EUR/USD, it appears the thin market conditions are favoring the bears. After failing to breach the 20 SMA on the 4-hr chart, the EUR/USD decline accelerated!
That's why the next dynamic support for the EURO bulls is now sitting at 1.0830 but could change with each new candlestick.
If this dynamic support fails, the next support level will be 1.0745, which also happens to the 61.8% fib retracement of last year's decline.
To conclude, the technical indicators are pointing towards more downside movement in the EUR/USD.
On the downside, the support levels of EUR/USD are located at 1.0830, followed by 1.0790 and 1.0745. On the upside, the nearest resistance is 1.0885, followed by 1.0930. If the 1.0930 is breached and tested, it would take the Euro bulls to the 1.0985 resistance.
But considering how the chances of rate hike by Fed are increasing, it wouldn't be wrong to consider more USD strength in the coming weeks and months.