Synopsis:

Bank of America identifies a potential bear flag formation on the EUR/USD daily chart, suggesting a possible continuation of the downward trend. Key resistance levels and historical patterns support this bearish outlook.

Key Points:

• Bear Flag Formation: Analysts at BofA have observed what appears to be a bear flag pattern forming on the daily chart of EUR/USD as of late April. This pattern is typically indicative of a continuation of a prior downtrend following a brief consolidative period.

• Critical Levels to Watch: A break below the key support level of 1.0675 would confirm the bear flag pattern, potentially setting the stage for a move toward the year-to-date low at 1.0601, and possibly extending to the 2023 low of 1.0448.

• Resistance Levels: The EUR/USD faces significant resistance from declining moving averages and trend lines that currently cap the spot rate at or below the 1.08-1.0840 range. These levels need to hold to maintain the bearish outlook.

• Additional Chart Patterns: Supporting the bearish view, a diamond top pattern has also been confirmed on the weekly chart, which generally signals a reversal from previous uptrends. This pattern aligns with the potential for further declines.

• Longer-Term Targets: Should the bear flag and other bearish patterns hold, the EUR/USD might target the 61.8% Fibonacci retracement level at 1.0201, provided weekly closes remain below medium-term trend line resistance at 1.0915.

Conclusion:

The technical analysis by Bank of America suggests a cautious or bearish stance on EUR/USD in the near to medium term, given the formation of a bear flag and the presence of other bearish chart patterns.