Bottom line: EURUSD long term trend might be reversing lower against 1.1909 highs. Bears might be preparing to take control back and push lower towards 1.0636 over the next several weeks. It is critical for 1.1909 levels to hold, going forward.
Fundamental Outlook:
EURUSD had raised through 1.1909 levels last week before turning lower amidst profit taking. Friday saw prices peaking at 1.1909 first and closing lower at 1.1770, swinging close to 150 pips. The exchange rate might come under further pressure as US Dollar might gain over the next few weeks.
FTSE had closed lower around 5900 on Friday, dropping by over -2.16%. The indice might be set to recover as markets open today and could reach 6100/50 mark. Global Markets might face another round of selloff as risk sentiment remains fragile over COVID-19 pandemic and US-China tensions.
GBPUSD also managed to push higher on Friday hitting 1.3170, before reversing sharply. The exchange rate swung over 130 pips before closing around 1.3080. Bank of England would be coming out with its monetary policy this week and GBPUSD exchange rate might be taking its cues from there.
COVID-19 infections continue to rise across countries as fear of the second wave grips further. Infections rise in Spain and Australia, as the city of Melbourne is being locked down again. Adding to this is the rising tensions between US and China as TikTok might be banned in the US. Risk aversion might return and the safe haven US Dollar might be set to gain, going further.
Technical Analysis:
EURUSD has managed to print yet another high just above 1.1900 handle over the last week. Bears have managed to come back strong since those levels as EURO prints 1.1740 lows, before pulling back today. The structure might be turning in favour of bears, going forward.
EURUSD weekly chart is suggesting a bearish outlook from here on. The major boundary between 1.2555 highs in February 2018 and 1.0636 lows in March 2020, has been retraced. Bulls have managed to reach up to fibonacci 0.618 retracement of the above drop, around 1.1820.
Ideally, a bearish turn from 1.1800/1.1900 remains high probability if EURUSD bears are able to hold prices below 1.1900/10 levels, going forward. If not a trend reversal, one can expect a meaningful corrective drop at least since the rally between 1.0636 and 1.1900 is an impulse.
Traders might be preparing to initiate fresh positions from current price action (1.1770), with a protective stop above 1.1909 and projected targets towards 1.1167 levels at least. Only a break above 1.1909 would delay matters further.
Prepared by
Harsh Japee, Technical Analyst.
EURUSD Chart
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