EURUSD recently broke below an ascending trend line support to indicate that a downtrend will follow. Price could still correct to former support, which might hold as resistance moving forward.

The 100 SMA just crossed below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is likely to gain traction. The gap between the indicators is widening to indicate stronger bearish momentum, and the 100 SMA is currently holding as dynamic resistance as it lines up with the 38.2% Fib.

A larger correction could last until the 61.8% level that’s closest to the broken trend line around 1.2270. The 50% level lines up with the 200 SMA and might hold as strong resistance as well.

In any case, if any of the retracement levels are enough to draw sellers back in, EURUSD could resume the slide back to the swing low at 1.2134 or lower.

Stochastic is already in the overbought zone to reflect exhaustion among buyers, and the oscillator is slowly turning lower to signal a return in selling pressure. RSI is also turning lower to show that sellers are about to take over.

EURUSD could see additional volatility around the time of ECB head Lagarde’s speech during a Reuters online event or during the release of the industrial production figures. Weak results are eyed, so a downside surprise might drive the shared currency further south.

Meanwhile, the dollar could regain some ground as Fed officials recently shared optimistic remarks on policy and economic performance. Also the US currency could continue to benefit from safe-haven flows while market watchers remain focused on the resurgence in COVID-19 cases due to the new strain of the virus.

The rollout of the vaccine, however, could bring in risk appetite and lead to unwinding of dollar gains.