Bottom line: EURUSD long term structure remains bullish against 1.0636 lows. Over the medium term through, the currency might have carved a meaningful top around 1.2000 handle. Bears might be poised to push lower towards 1.1160/70 mark I the next several weeks.

 Fundamental Outlook:

EURUSD had dropped by -1.77% over the last week closing around 1.1630 mark. The exchange rate has been under pressure since September 01, 2020. As risk assets declined, the safe haven US Dollar has managed to gin across major currencies. The exchange rate might remain under pressure with US Presidential debate, NFP event risks lined up this week.

FTSE had declined by -1.94% over the last week, as risk aversion continued. Dow Jones and SPX500 dropped around -2.0% and 0.97% respectively and US Dollar Index rose by +1.7% in the last week. Investor sentiment remains fragile over the additions US stimulus package and risk assets might continue its selloff over the next several weeks.

GBPUSD remained under pressure over the last week and managed to close at 1.2745, down -1.31%. The exchange rate might continue to be driven by Brexit developments as October 15, 2020 deadline approaches. An agreement must be reached by the above date to ensure smooth transition by December 31, 2020.

Technical Analysis:

EURUSD bears seem to be in control after printing highs around 1.2 handle early this month. It is trading close to 1.1630/35 levels for now and might produce intraday/short term pullback towards 1.1800 handle. Bears might remain poised to resume lower thereafter.

EURUSD had dropped to 1.0636 lows in March 2020. Bulls had managed to regain control since then as they produced an impulse wave between 1.0636 and 1.2 handle. As discussed earlier, an impulse wave should be followed by a corrective wave in the opposite direction.

EURUSD bears might have begun the proposed corrective drop, which might extend towards 1.1167 levels at least. The fibonacci 0.618 retracement of the impulse wave is also passing through 1.1162 levels. Probability for bulls to be back in control remains high around 1.1100/60 zone.

Most traders might be willing to hold short positions initiated around 1.1920/50 levels and add further on intraday rallies through 1.1800 mark. The protective stop might be placed above 1.2 and projected targets toward 1.1100/60 levels going forward.

Prepared by

Harsh Japee, Technical Analyst.

EURUSD Chart

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