EUR/USD trades around 1.1150 in the early American session on Friday as investors assess the latest inflation data from the US. According to the US Bureau of Economic Analysis, Core PCE Price Index rose to 4.9% on a yearly basis in December from 4.7% in November, surpassing the market expectation of 4.8%.

EUR/USD has failed to shake off the bearish pressure and touched its weakest level since June 2020 below 1.1130 Friday. Although the near-term technical outlook shows that the pair remains extremely oversold, buyers are unlikely to take action with the Fed's hawkish policy outlook favouring the dollar.

After seven consecutive four-hour candles closed in the negative territory, EUR/USD staged a technical correction but lost its bullish momentum near 1.1150, suggesting an interim resistance has formed at that level.

Meanwhile, Germany's Economy Adviser in a statement called upon the European Central Bank (ECB) on Friday to act in inflation in the euro is persistent while noting that there was no reason for a rate hike yet.

In the meantime, the pair continues to show extremely oversold conditions with the Relative Strength Index (RSI) staying way below 40. Furthermore, EUR/USD is trading below the descending regression channel coming from mid-January.

Even if the pair were rise above 1.1150 and return within the descending channel, sellers are likely to remain in control as long as the 1.1220 (upper limit of the descending channel) resistance holds.

On the downside, 1.1100 (psychological level) aligns as the next support.  Back in January 2020, EUR/USD extended its decline to 1.1000 it broke below 1.1100 and a similar action could be expected in the short term.

EURUSD Needs to Recover From Oversold Conditions

Jan 28 2022

Take Profit +1.62%

Holding time 4d20hr

1.11450

Entry price

1.13260

Take profit price