Consolidation or Collapse? EUR/USD Tests Key Support at 1.0425

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EURUSD on a 4-Hour Timeframe 
 

The EURUSD pair has been in a sustained downtrend since early October, as evidenced by its sequence of lower highs and lower lows. This movement aligns with a bearish dominance, which began to accelerate after the announcement of US election results, marked by increased volatility and a strengthening US dollar. Over the past two months, the pair faced consistent resistance near the 200-period simple moving average (SMA), depicted by the yellow line, while the 50-period (green) and 100-period (blue) SMAs provided dynamic resistance during intraday corrections. 

In recent sessions, the pair has shown signs of consolidation between 1.0425 and 1.0609, suggesting a potential pause in bearish momentum. The RSI indicator has climbed to the neutral zone near 52.39, hinting at waning selling pressure. Meanwhile, the stochastic oscillator is nearing overbought levels, signaling potential exhaustion of the recent recovery attempt. The price currently hovers just above the 50-period SMA, indicating tentative bullish interest, though the broader trend remains bearish. 

Technical indicators confirm mixed signals. The 200-SMA remains far above the current price, reflecting the overall bearish sentiment. The 50-SMA has flattened slightly, hinting at reduced selling momentum. The RSI’s rise suggests some buying interest but lacks conviction, while the stochastic's positioning suggests a potential pullback in the near term. Overall, the technical landscape leans toward caution for aggressive bullish bets. 

Under the main scenario, the EURUSD is expected to continue its broader downtrend, with a potential breakdown of the 1.0425 support level targeting 1.0333 in the coming sessions. A resurgence of bearish momentum, fueled by hawkish rhetoric from the Federal Reserve or further signs of Eurozone weakness, would likely accelerate this decline. The pair may find interim resistance near the psychological level of 1.0609 if any corrective moves unfold. 

Alternatively, if the EURUSD breaks decisively above 1.0609 and sustains that level, it may challenge the 1.0680 resistance, supported by bullish sentiment in response to softer-than-expected US labor market data or unexpectedly dovish comments from the Federal Reserve. This scenario would likely represent a temporary correction within a larger bearish framework rather than a reversal. 

Investors should monitor the December 6 Non-Farm Payrolls report closely, as a strong reading could further strengthen the dollar, pressuring EURUSD lower. Conversely, any disappointing data may provide relief to the euro. Additionally, geopolitical developments in the Eurozone, particularly in France and Eastern Europe, could exacerbate volatility. Given these risks, caution is advised in trading ahead of high-impact news events. 

Summary: 

• EURUSD consolidates between 1.0425 and 1.0609, indicating a pause in bearish momentum. 
• RSI climbs to 52.39, suggesting waning selling pressure but no strong bullish signals. 
• Key resistance at 1.0609; a breakout could target 1.0680 in a corrective move. 
• Support at 1.0425; a breach may lead to further declines towards 1.0333. 
• Upcoming Non-Farm Payrolls data and geopolitical factors could dictate the pair's next significant move.