The outlook for EUR/USD has deteriorated further following Wednesday’s slump to sub-1.1500 levels. As usual, the pair’s price action is predicted to mainly track the dynamics around the dollar, while bouts of occasional strength are seen coming from broad risk appetite trends. On the more macro view, the loss of momentum in the economic recovery in the region - as per some weakness observed in key fundamentals – coupled with rising cases of COVID-19 is also seen pouring cold water on investors’ optimism and tempering bullish attempts in the shared currency. Further out, the euro should remain under scrutiny amidst the implicit debate between investors’ expectations of a probable lift-off sooner than anticipated and the ECB’s so far steady hand, all amidst the persevering elevated inflation in the bloc and rising convinction that it could extend further than previously estimated.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES : (TECHNICALS)

The Relative Strength Index (RSI) indicator on the four-hour chart slumped below 30, pointing to oversold conditions. The last time the RSI fell below 30 in late September, EUR/USD staged a rebound and gained nearly 70 pips in the next two weeks before making a lower low. So, a similar action could be witnessed in the short term.

On the downside, initial support is located at 1.1455 (daily low) ahead of 1.1430 (static level) and 1.1400 (psychological level).

On the other hand, the first recovery target could be seen at 1.1500 (psychological level). A daily close above that level could open the door for additional gains toward 1.1530 (previous support, static level) and 1.1550 (20-period SMA).

Will EURUSD extend its losses towards 1.1400?

Nov 11 2021