EUR/USD remains extremely oversold and may see a technical correction

EUR/USD has extended its slide toward parity early Tuesday. The pair is struggling to shake off the bearish pressure in the risk-averse market atmosphere but the near-term technical outlook points to extreme oversold conditions, FXStreet’s Eren Sengezer reports.

Can buyers continue to defend parity?

“Later in the session, the IBD/TIPP Economic Optimism Index and the NFIB Business Optimism Index will be featured in the US economic docket. Unless the US data point to a surprising improvement in business sentiment, investors are likely to stay away from risk-sensitive assets in the second half of the day.”

“The Relative Strength Index (RSI) indicator on the four-hour chart dropped all the way to 20 and EUR/USD trades near the lower limit of the descending regression channel coming from late June. Both of these technical developments how extremely oversold the pair in the near term. Hence, sellers could move to the sidelines and wait for a technical correction before continuing to short the pair.”

“On the upside, 1.0050 (static level, mid-point of the descending channel) aligns as first hurdle ahead of 1.0075 (upper limit of the descending channel) and 1.0100 (psychological level, 20-period SMA).”

“In case 1.0000 (psychological level) fails, the next bearish targets are located at 0.9950 (static level from November 2002) and 0.9900 (psychological level).”