EUR/USD has lost its traction and retreated toward 1.0800 in the second half of the day on Monday. As investors await headlines surrounding debt-limit talks, the cautious market stance helps the US Dollar hold its ground and limits the pair's upside. Last week’s bearish close marked the second consecutive week in red and weighs on near-term action, supporting scenario of limited correction before bears regain control.

The EUR/USD pair holds on to modest intraday gains with limited upward strength. Technical indicators in the daily chart remain within negative levels, having pared their recoveries and currently lacking directional strength. At the same time, the 20 Simple Moving Average (SMA) extends its slide far above the current level while the pair seesaws around a flat 100 SMA. The pair can gain downward traction once below 1.0790, and test a critical long-term support level at 1.0745, the 61.8% Fibonacci retracement of the 2022 yearly slump.

While initially supported by the 1.0760 region, occasional bullish attempts could see the pair confront the interim resistance area at the 55-day SMA at 1.0868 prior to the psychological 1.1000 mark.

Extra losses are not ruled out, however, in the current context, although a sustained retracement to the March bottom of 1.0516 (March 15) is not favoured for the time being.

In the near term, the pair is technically neutral. EUR/USD recovered above a still bearish 20 SMA while it remains below the longer ones. The 100 SMA has crossed below the 200 SMA and gains downward traction, usually a sign of increasing selling interest. Finally, technical indicators approach their midlines from below but without enough strength to anticipate a bullish continuation in the upcoming hours.

EURUSD to fall below 4HEMA200

May 22 2023