EUR/USD is seen at risk to a near-term counter-trend rebound. Resistance for a rebound is seen at 1.1186 initially, then 1.1206 with a cluster of levels at 1.1259/72 ideally capping a bounce.

We shall maintain an immediate tactical negative outlook whilst below 1.1312.

Post a rebound we will look for a resumption of the decline with a break of 1.1115 seeing support next at the ‘measured top objective’ at 1.1075 and then our 1.1019/02 long-held objective – the 78.6% retracement of the 2020/2021 bull trend and top of the base from April/May 2020. We would look for a fresh phase of consolidation to develop from here.

Bears are consolidating above new seven-month low (1.1145, posted on last week’s 1.74% fall) on Monday, with limited bounce before larger bears regain full control, seen as likely scenario.

Oversold stochastic on daily chart signals correction, but 14-period momentum on both, daily and weekly chart, remains deeply in negative territory, reinforcing underlying bearish bias.

Upticks should be capped by strong barriers at 1.1260/90 zone (Fibo 38.2% of 1.1482/1.1121 bear-leg / base of thick daily cloud) to keep bears in play for fresh push towards targets at 1.1040/00 (Fibo 76.4% of 1.0635/1.2349 / psychological).

Fundamentals may also work against the single currency, as ECB is expected to stay on hold on its policy meeting due later this week, that would add to concerns about accelerating divergence from the US Federal Reserve, after the Fed chief Powell sent signals for four rate hikes this year.

Expected Bearish Final Leg Continuation From CMP

Jan 31 2022