Euro Hits Oversold Levels Against Dollar Amid Key Support Break
The euro has broken through key support against the dollar, dropping below $1.135 and entering oversold territory. The relative strength index is now below 30, and the exchange rate is trading at its lower Bollinger Band. While this suggests the euro's decline may pause, it does not guarantee an end to the sell-off.
If EUR/USD reverses, any recovery could be short-lived due to strong resistance near the 10-day exponential moving average and around $1.135. Breaking above this resistance could extend the recovery, potentially pushing the exchange rate back to the 20-day moving average at $1.14.
However, oversold conditions could also be resolved through sideways trading, which may signal a bearish outlook. This would indicate a lack of buying interest, setting the stage for further declines. The euro's weakness is driven by fiscal concerns and high oil and diesel prices, meaning a sustainable rally would require a shift in news flow.
If the decline continues and stabilization fails, the next support level could push the exchange rate to around $1.109, a low established on May 12, 2023.