EUR/USD Rate Eyes 2017 Low as Bear Flag Formation Unfolds

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EUR / USD Price Talk Points

EUR / USD is trading at a recent annual low (1.0354) as bear flag formation develops, and the oversold reading in the Relative Strength Index (RSI) is likely to accompany a further decline in the exchange rate as the bearish momentum seems to gather. rhythm.

EUR / USD Index Eyes 2017 Low as Bear Flag Formation Develops

EUR / USD is on top to test the 2017 low (1.0340) as it depreciates over the fifth consecutive week, and a failure to hold above the 2003 low (1.0334) may push the exchange rate to parity as the Federal Reserve normalizes monetary policy forward. of its European equivalent.

As a result, the EUR / USD may continue to depreciate ahead of the Federal Open Market Committee’s (FOMC) interest rate decision on June 15, as the central bank appears to be on track to deliver another 50bp rate, and it seems as if the change in the previous leadership of the European Central Bank (ECB) little will affect the exchange rate even as president. Christine Lagarde insists that “it is appropriate that policy return to more normal settings. ”

The ECB appears to be on a predetermined course as it is planned to conclude its assets in the third quarter of 2022, and the Governing Council may simply try to buy time at its next meetings on June 9, as President Lagarde reiterates that “tthe first exchange rate, informed by the ECB’s previous guidance on interest rates, will take place some time after the end of net assets.. ”

However, President Lagarde acknowledged that “this could mean a period of only a few weeks”As the Governing Council presses to tame inflation, but current market conditions may continue to drag on EUR / USD especially as the US Dollar benefits from the deterioration of risk appetite.

In turn, the bestselling reading in the RSI will likely accompany a further decline in EUR / USDas the price action seen earlier this year, while the tilt in retail sentiment looks set to continue, as traders have been net long the pair since mid-February.

Picture of IG Customer Sense for EUR / USD exchange rate

La IG Customer Sense Report shows 78.30% of merchants are at present net-long EUR / USD, with the proportion of traders long to short standing at 3.61 to 1.

The number of net-long traders is 2.32% higher than yesterday and 1.00% lower than last week, while the number of net-short traders is 18.38% lower than yesterday and 8.73% lower than last week. The marginal decline in net long-term interest has done little to dampen mass behavior, as 72.27% of traders were net-long EUR / USD earlier this week, while the decline in net-short position comes as the exchange rate trades to. fresh annual low (1,0354).

Dirite, EUR / USD the minimum in 2017 (1.0340) because the RSI is sitting in oversold territory, but failure to test the 2003 low (1,0334) may pull the oscillator back above 30 if the key price area acts as a support.

EUR / USD Daily Daily Chart

Image of EUR / USD daily exchange rate

Source: Business View

  • Bear flag formation seems to be developing as EUR / USD clears the April low (1.0471), with the exchange rate on the 2017 low test margin (1.0340) as the Relative Strength Index (RSI) pushes into bestselling territory for the second time this month.
  • Pause / close under the Fibonacci overlaps 1.0330 (161.8% expansion) to 1.0370 (38.2% expansion) opens the 1.0070 (161.8% expansion) region, with a shift below par bringing the December 2002 low (0.9859) on the radar.
  • However, lack of momentum to test the 2003 low (1.0334) May pull the RSI out of oversold territory, and failure to break / close below the overlaps around 1.0330 (161.8% expansion) to 1.0370 (38.2% expansion) can push EUR / USD back to the 1.0500 (100% expansion) handle, with the next area of ​​interest coming around 1.0630 (78.6% expansion).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong



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