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Nov 23 - 01:55 PM

EUR/USD - COMMENT-EUR/USD Downtrend Hits Near-Term Target, But Upside Limited

By Randolph Donney  —  Nov 23 - 11:52 AM

The oversold EUR/USD bounced off near-term Fibo target support with the aid of above-forecast euro zone nL1N2SE0G0 and mixed U.S. PMIs nZON004ITQon Tuesday, but gains will be going against the grain of broader monetary policy divergence and pandemic trends, and thus short-lived.

Markit services PMI missed, but record high composite input prices suggest further divergence between the Fed eyeing faster removal of emergency easing measures nL1N2SE1I1 and ECB caution about cutting accommodation nL1N2SD0EU, particularly with soaring COVID cases in Germany nL1N2SE0EZ and restrictions returning.

Tuesday's 1.1226 low is at the 161.8% Fibo target taken from the Oct.
28 high and Nov.
5 low.
With daily and weekly RSIs oversold there's some scope for a corrective bounce, but Monday's close well below the 61.8% Fibo of the 2020-21 pandemic rally at 1.1290 points to the 76.4% Fibo and even 2020's pandemic nadir at 1.1043/1.0636 eventually being reached.

The 1.1290 level and Monday's 1.1296 high are initial hurdles, followed by the plunging 10-day moving average that will be near at 1.1325 on Wednesday, and Thursday's 1.13745 rebound high on EBS.

The market's already priced in Fed hikes beginning in June, but a May hike pricing would trigger EUR/USD's next drop.

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Refinitiv IFR Research/Market Commentary


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