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EUR/USD Outlook: Near-Term Action Extends Sideways Mode but Larger Picture Remains Bearish

The Euro bounces on Monday, reversing over 50% of Friday’s 0.85% drop and bringing the price to the middle of the range that extends into a fifth straight week.

Fresh strength partially offsets negative signal from last week’s bearish close following a triple weekly Dojis which signaled strong indecision, as larger bears took an extended breather.

Near-term tone is expected to remain neutral while the price moves around converged and sideways-moving 10&20DMA’s and holds within larger 1.1380/1.1186 range.

But larger picture is bearish and warns that the downtrend is likely resume after prolonged consolidation, as the pair has eventually registered a weekly close below key Fibo support at 1.1290 (61.8% of 1.0635/1.2349 ascend).

Fundamentals also do not work in favor of euro, as surging Omicron cases boost expectations for fresh restrictive measures in Europe and dent risk sentiment, while soft tones from the ECB and more than expected hawkish Fed, add pressure on the single currency.

Larger bears look for fresh negative signals on repeated weekly close below 1.1290 Fibo level that would open way towards targets at 1.1040/1.1000 (Fibo 76.4%/psychological).

Falling 30 DMA (1.1319) offers solid resistance, guarding upper pivot at 1.1380 (range top / Fibo 38.2% of 1.1692/1.1186), break of which would sideline bears.

Res: 1.1319; 1.1360; 1.1380; 1.1439.
Sup: 1.1234; 1.1204; 1.1186; 1.1100.

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