VOT Research Desk

Market Analytics and Technical Considerations

The EUR/USD experienced a significant breakthrough the week before, but this week’s movement has slowed due to a key level being tested at 1.0350.

Since the Euro makes up 57.6% of the DXY, EUR/USD depreciation will probably be required in circumstances where the USD gains strength. So, if the EUR/USD has established a narrow high, the USD/DXY has probably experienced a short-term low.

Trends develop over time, and healthy ones can progress through multiple “mini trends” or phases. However, even the strongest trends are susceptible to reversals after a while if there is sufficient imbalance. In addition, that is what has been taking place in EUR/USD.

We had written about this in October, when the brutal sell-off in EUR/USD was finally beginning to show early signs of a possible, if not a long-term, pullback from the bearish trend. The psychological level of.9500 was a point of prior resistance-turned-support that came into play in late September, but EUR/USD bears were unable to elicit a test of it. This plots at the .9594 level and it was tried north of a three-day-time span in late-September, which drove into a slope of more promising low points in the period of October which ultimately prompted a breakout to new momentary highs toward the beginning of November.

However, given that the Euro and the US Dollar are the two most important currencies in the world, the pace of the decline before the rebound was noteworthy.

In February, the EUR/USD bearish trend took on a whole new life. When Russia invaded Ukraine, the situation in Europe, which was already precarious due to slow growth and rising inflation, became significantly more uncertain, putting the European Central Bank in a more difficult policy position.

This fear contributed to EUR/USD falling below the parity handle, but the 1.0350 level arguably provided better support than parity later in the summer. In 2017, the price of 1.0350 was the swing low. In May, this price came back into play, resulting in a 400 pip bounce. It held support once more in June, but it bounced less strongly this time, forming a descending triangle that was broken in July as prices fell for a parity test.

Additionally, when price action recovered from parity, it encountered resistance at the 1.0350 level. That brought sellers back into the equation, and a few weeks later, parity was broken, which eventually led to a test of the.9594 level.

Last Friday, the price of 1.0350 came back into play. We began looking at bullish setups for the EUR/USD currency pair toward the end of last month, primarily based on a buildup of higher lows. Furthermore, given how extended the trend had become, there were probably stops above parity and round numbers like.9900.Additionally, as demand increased after price breached those levels, short-term stops were activated, resulting in additional breakout.

That and the bullish breakout that occurred last week in EUR/USD that extended all the way to the 1.0350 level appear to be somewhat comparable.

Monday saw a swift reaction at that level, with price retreating to a crucial Fibonacci level at 1.0282, where the 38.2 retracement of the move from September to February was plotted. That aided in maintaining the lows, which resulted in a Tuesday attempt to break out. An extended wick on the daily chart emphasized the reversal theme as that breakout failed. Additionally, lower highs have continued since then; however, bears haven’t been able to break below 1.0350 for long.

EUR/USD ACTION PLAN

At this point, the most important conclusion is that sellers have not yet regained control. Yesterday, they had a door open for such things, but they didn’t go through it. Having said that, bulls haven’t done much with the 1.0350 support hold either, and this week’s compression could be a sign of a turn.

But at this point, it seems like the 1.0282 Fibonacci level is the one to pay attention to because it has held two separate support tests and resulted in a higher-low. A move lower to 1.0250 is possible if the higher-low at 1.0303 is breached, and a retest of the Fibonacci level is possible if that level is breached. After that, we would see a new weekly low, making it appear more likely that EUR/USD has formed a short-term top at that point. The focus would then shift to the 1.0175-1.0198 range and the 1.0090 level.

On the other hand – and this is to a great extent because of the absence of reaction from bears up until this point yet, on the off chance that we really do see an inability to break down, the following push up to a new high could be of interest for swing-blurs. The psychological level of 1.0500 is just above the high from this week, and if there is a reaction there, it could be an early sign of low demand.