EUR/USD Bearish Bias Takes Hold, Lowest Weekly Close Since 2002
The EUR/USD pair managed to recover from fresh five-year lows and regained the 1.0400 mark, helped by the improvement in market sentiment.
The euro fell to its lowest level since January 2017 at 1.0348 on Friday but trimmed losses as the dollar staged a correction across the board while US stock indexes rallied. Still, the EUR/USD is poised to record its lowest weekly close since December 2002 at around 1.0400.
Despite “hawkish” hints from European Central Bank President Christine Lagarde, the monetary policy divergence with the Federal Reserve is likely to continue to drive the EUR/USD lower. The Fed has already begun its tightening cycle and has more room for harsh measures to combat inflation than the ECB, as the Russia-Ukraine conflict is taking a heavier toll on the European economy.
From a technical perspective, the EUR/USD pair holds a negative bias according to the weekly chart. However, technical indicators point to oversold conditions, which could favor a consolidative phase or even a limited upward correction before another leg down.
The daily chart offers a similar picture, although the RSI has already begun to correct oversold readings. The next bearish target is seen at the January 2017 low of 1.0340. Should the EUR/USD breach this level, it will be trading at its lowest since 2003, focusing on the 1.0300 area.
On the other hand, short-term resistance could be found at the previous low at around 1.0470, followed by the 20-day SMA at 1.0600. A recovery beyond this level seems unlikely at this point in the absence of fundamental triggers.
The euro fell to its lowest level since January 2017 at 1.0348 on Friday but trimmed losses as the dollar staged a correction across the board while US stock indexes rallied. Still, the EUR/USD is poised to record its lowest weekly close since December 2002 at around 1.0400.
Despite “hawkish” hints from European Central Bank President Christine Lagarde, the monetary policy divergence with the Federal Reserve is likely to continue to drive the EUR/USD lower. The Fed has already begun its tightening cycle and has more room for harsh measures to combat inflation than the ECB, as the Russia-Ukraine conflict is taking a heavier toll on the European economy.
From a technical perspective, the EUR/USD pair holds a negative bias according to the weekly chart. However, technical indicators point to oversold conditions, which could favor a consolidative phase or even a limited upward correction before another leg down.
The daily chart offers a similar picture, although the RSI has already begun to correct oversold readings. The next bearish target is seen at the January 2017 low of 1.0340. Should the EUR/USD breach this level, it will be trading at its lowest since 2003, focusing on the 1.0300 area.
On the other hand, short-term resistance could be found at the previous low at around 1.0470, followed by the 20-day SMA at 1.0600. A recovery beyond this level seems unlikely at this point in the absence of fundamental triggers.