Bottom line: EURUSD medium to long term structure might turn bearish against 1.1965 levels. The currency is seen to be trading below 1.1900 as we prepare to publish. Bears are looking poised to push lower towards 1.0636 levels.
Fundamental Outlook:
EURUSD had rallied on Friday, to close above 1.1900 mark after a volatile trading session the day before. The FOMC might continue its dovish stance and more accommodative monetary policy going forward. The above announcement might have led to the US Dollar slide over the last week.
GBPUSD has managed to print 1.3369 high today, as the safe haven US Dollar continued to slide during the Asia-Pacific session. It would be interesting to see if the exchange rate pushes further towards 1.3400/1.3500 psychological mark.
COVID-19 infections continue to rise in several European countries, increasing the risk of a second wave. The worst affected nations Italy, Spain and France might be facing more restrictions and lockdowns if infection rate increases further.
Technical Analysis:
EURUSD weekly chart has been brought up today to discuss potential trade direction over the next several weeks/months. The currency might have carved a meaningful top around 1.1965 on August 18, 2020. Furthermore, the recent pullback has hit resistance around 1.1930 as well.
EURUSD had carved a major bearish boundary between February 2018 and October 2019. The currency had dropped from 1.2555 through 1.0780 levels respectively, producing an impulse wave. As discussed earlier, an impulse is normally followed by a correction in the opposite direction.
EURUSD bulls managed to produce a complex corrective wave between 1.0780 and 1.1965 levels. Also note that the counter trend rally has reached up to fibonacci 0.618 retracement, of the entire drop. High probability remains for a bearish reaction, going forward.
Most traders might be preparing to initiate short positions around current price action (1.1900/10), with protective stops above 1.1965 and target potential towards 1.0636 over the next several weeks to come. Major bearish opportunity might be unfolding from here.
Prepared by
Harsh Japee, Technical Analyst.
EURUSD Chart
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