Bottom line: EURUSD medium term structure might be turning bearish against 1.1965 mark. Bears are looking poised to take control back from here as prices dropped through 1.1754 levels, before pulling back higher again.
Fundamental Outlook:
EURUSD had reversed from recent highs at 1.1965 on August 19, 2020 post FOMC minutes. The exchange rate had print 1.1754 low before pulling back. It might come under further pressure as the US Dollar strengthens over next few weeks. Watch out for the Jackson Hole Economic Policy Symposium later this week, which may add bearish pressure.
GBPUSD exchange rate had reversed from 1.3267 mark over the last week, closing below 1.3100 handle last week. The exchange rate might face volatile price action as yet another round of Brexit negotiations failed over the last week. It would also take cues from the Jackson Hole Symposium as US Dollar might be setting up to gain.
FTSE is up +1.2% as we prepare to publish and trades close to 6100 mark. The indice remains at a risk of yet another round of selloff as global indices continue to diverge. While SPX500 and NASDAQ climb to new highs, Dow Jones remains stagnant. Investors might remain watchful as COVID-19 infections and geopolitical risks remain.
Technical Analysis:
EURUSD bears might be inclined to be back in control as the currency revered sharply from 1.1965 highs over the last week. An engulfing bearish candlestick pattern has appeared on the Daily chart while a shooting star is produced on the weekly. Looking lower from here against 1.1965 mark.
EURUSD had rallied from 1.0636 through 1.1965 since last several weeks completing an impulse rally. Ideally, an impulse should be followed by a corrective wave towards the opposite direction. Bears might be preparing to drop toward 1.1100/50 levels at least from here.
Also note that fibonacci 0.618 retracement of the above rally is also passing through 1.1140 mark. High probability remains for a bullish bounce if prices manage to reach there. Only a consistent drop below 1.0775 levels would threaten to break below 1.0636 lows.
Most traders might be preparing to initiate fresh short positions from 1.1900/10 levels, which is fibonacci 0.618 retracement of recent drop from 1.1965 through 1.1754 respectively. Protective stops might be place just above 1.1965 mark with projected targets towards 1.1150.
Prepared by
Harsh Japee, Technical Analyst.
EURUSD Chart
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