EUR/USD technicals: Downward extension ahead - FXStreet

Valeria Bednarik, Chief Analyst at FXStreet, notes that EUR/USD technical indicators head sharply lower following the Brexit outcome last Friday, supporting a continued decline for the upcoming days.

Key Quotes

The UK has voted to leave the EU, and markets had one of many to come, Black Friday. The final result of the UK's referendum on EU membership showed that  52% voted in favor of ‘Leave‘ and 48% in favor of ‘Remain’. Markets were taken off guard, and currency pairs moved by hundreds of pips all through the day.

It will take some time to sort out the mess, but life goes on. The immediate consequence of this Brexit has been high yielders plummeting and safe havens soaring, but will have many other implications that will develop during the upcoming days, and weeks and even months, the most notable one, is that Central Banks will probably turn ultra dovish, and a FED rate hike is out of the table for the rest of this 2016.

The EUR/USD pair settled at 1.1086 by the end of the week, having been down to 1.0910 in the peak of panic selling, and has broken below the daily ascendant trend line coming from November 2015 low, with intraday recoveries towards it, resulting in sharp retracements.

Technically, the daily chart shows that the pair closed the week a handful of pips above the 200 DMA, whist the technical indicators head sharply lower within negative territory, supporting a continued decline for the upcoming days moreover on a downward acceleration below the mentioned DMA at 1.1080. In the 4 hours chart, the technical indicators have managed to correct extreme oversold readings before resuming their declines, also pointing for a downward extension ahead.