Bank of America Global Research discusses EUR/USD technical outlook and sees a scope for an extended rally towards 1.09 before a sell-off towards 1.05.
"The euro recovery and broad selloff in the USD has resulted in a price trends retracing almost half of their 2021-2022 trends. For this statement to be factual, the euro will need to trade to 1.09 and DXY to 102. A golden cross signal for the euro and death cross signal for the DXY favor this in the short term.
Medium term, the art of the signal suggests buying a euro correction in 1Q23 and selling a DXY rally in 1Q23 provided the 50d remains above the 200d SMA and the 200d SMA slope turns up. The science is less convincing because the slope of the 200d SMAs were not sloping in the direction of the crosses," BofA notes.
"By reaching the 1.09s euro will be backtesting this line with potential for it to be again serve as a pivot point for a correction lower. Possibly a correction to 1.05 before any further strength can occur such as to each markets 200wk SMA's in the 1.12s and 97s," BofA adds.