The EURUSD pair staged a solid bounce against the US dollar on the foreign exchange market last week after European Central Bank announced that they would be buying fewer bonds, however, a brutal sell-off ensued just one day after.
Financial markets were fairly muted after the ECB’s rate announcement, but the euro currency and spiked notable following Christin Lagarde’s comments.
With inflation spiking in the euro zone to 3.4% in September, representing a 13-year peak, euro traders are no doubt concerned about inflation and rapidly rising energy prices.
However, bears cracked the 1.1600 level as the US dollar index roared back on Friday, setting the stage for more EURUSD downside this week if the FED act as expected and taper.
Worryingly, the technicals over the medium-term highlight that the EURUSD could actually drop towards the 1.1400 level if we look at pattern analysis alone.
Let us not forget that the US non-farm Payrolls and FOMC policy meeting will define the price movements for the US dollar for the rest of the week, and potentially the rest of November.
Something that is confirming the bearish side is the high levels of bullish sentiment towards the EURUSD. Traders have not yet turned bearish, which is a concern considered last Friday’s massive price plunge.
The ActivTrader Market Sentiment tool shows that some 59 percent of traders are bullish towards the EURUSD. This is a slight drop from last week, but it is worth watching as bullish sentiment is what euro bear need for further losses this week.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has crack the neckline of an extremely rising wedge pattern, which could propel the EURUSD pair towards the 1.1500 area.
Upside failure around the 1.1620 level would be heavily bearish this week. Let us not forget the struggle that the EURUSD pair had with the 1.1690 level last week.
Overall, expect the price movement in the EURUSD pair to be defined by a breakout or rejection from the 1.1600 to 1.1630 price range this week.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things looks very uncertain for EURUSD pair after bulls failed around cloud resistance from the Ichimoku indicator last week and also moved under major trendline support.
If the EURUSD pair did manage to perform a series of daily price under above the Tenkan Sen line and the Kijun Sen line, around the 1.1610 to 1.1626 area, this could encourage bears to test towards the 1.1400 area.
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