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EUR/USD is trading in the red 1.1271 level at the time of writing. It has registered a 1.30% drop from 1.1382 today's high to 1.1235 today's low. The pair plunged as the Dollar Index has rallied after the Fed Chair Powell Testifies. It seems that the DXY has ended its corrective phase and now it could resume its growth.
Still, it remains to see what will really happen as the new COVID-19 variant could force the FED to maintain its monetary policy unchanged. As you already know, the currency pair registered a short-term rebound after ending its previous leg down. As you already know from my analyses, EUR/USD was somehow expected to develop only a temporary rebound before dropping deeper.
EUR/USD drop was caused only by Powell's remarks. The US CB Consumer Confidence was reported lower at 109.5 below 110.8 expected, while the Chicago PMI dropped from 68.4 to 61.8 points far below 67.1 expected.
Technically, EUR/USD registered only a false breakout through the confluence area formed at the intersection between the descending pitchfork's median line (ML) with the weekly R1 (1.1363). Now, it has reached the 1.1239 static support where it has found some demand.
After the current sell-off, EUR/USD tries to recover. You already knew from my analyses that the descending pitchfork's median line (ML) represents a major dynamic resistance. I've told you that the price could drop anytime as long as it stays below it.
A false breakout with great separation above the 38.2%, R1, and through the median line (ML) signals that the sellers are still in charge. In the short term, the EUR/USD pair could try to rebound after the current massive drop. It could test and retest the immediate upside obstacles before dropping again.
A larger downside movement could be activated by a valid breakdown below the 1.12 psychological level. On the other hand, a potential bullish reversal could be activated by a valid breakout above the median line (ML).
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