EURUSD is expected to consolidate in a limited range.
The EURUSD pair fails to establish impetus on the opening day of a new week, oscillating in a narrow trading zone. Just above the mid-1.0500s during the Asian session.
The possibility of additional Fed policy tightening causes a new leg higher in US Treasury bond rates. Which continues to support the US Dollar (USD). Aside from that, future ECB rate rises are expected. For the time being. This may operate as a headwind for the EURUSD pair. However, the risk-on urge prevents traders from putting new wagers around the safe-haven Greenback. Providing some support to market prices.
EURUSD Technical Outlook
Technically, the current drop over the last two and a half months has been following a downward-sloping channel. Indicating a well-established short-term downtrend. Furthermore, the daily Relative Strength Index (RSI) has recovered from oversold area and now favors bearish traders. This, together with the occurrence of a death cross, shows that the EURUSD pair’s path of least resistance is to the downside.
Some follow-through selling below the daily low, around 1.0555, will confirm the trend. Bearish bias could pull spot prices down below the psychological barrier of 1.0500, or the lowest level since January last week. The latter corresponds to the bottom end of the aforementioned trend channel and should serve as a turning point. A strong breach below will, in turn, pave the way for a continuation of the downward trend towards the 1.0400 round figure.
On the other hand, the 1.0600 level, followed by Friday’s swing high around 1.0615. Could limit the EURUSD pair’s immediate gain. A prolonged rise over 1.0700 might spark a short-covering rally, lifting spot prices towards the trend-channel barrier. Which is now positioned at the round number.
Meanwhile, some follow-through purchasing will indicate that the pair has bottomed out. and change the short-term bias toward optimistic traders.
