EUR/USD outlook: Daily chart points to persisting downside risk

Slobodan Drvenica Windsor Brokers

EUR/USD

EURUSD edged higher in early Monday, driven by fresh risk appetite, after Friday’s US labor data signaled that the Fed might be done with hiking interest rates.

Fresh gains emerge after a multiple failure to register clear break through Fibo support at 1.0786 (76.4% of 1.0635/1.1275) and facing a minimum requirement in clearing 200DMA (1.0817) to ease existing downside risk and to allow for stronger recovery.

Near-term action remains within the range, limited at the upside by 100DMA (bull-trap) and weighed by thick daily cloud, base of which lays just above the range tops, while Fibo support keeps so far the downside protected.

Technical signals are mixed, as daily studies remain in bearish setup and keep in play risk of bearish continuation through 1.0786 pivot towards targets at 1.0700 (psychological) and 1.0635 (May 31 low).

On the other hand, initial bullish signal is developing on weekly chart (last week’s inverted hammer candle, 14-w momentum broke into positive territory and stochastic is oversold) which keeps alive expectations for stronger advance.

Break of 200DMA to expose 1.0875/86 (20DMA /Fibo 23.6% of 1.1275/1.0766 bear-leg), with extension above 1.0945/60 (Aug 30 recovery top / Fibo 38.2%) needed to signal reversal.

Otherwise, limited recovery (extended upticks to be capped under falling 20DMA) would offer better levels to re-enter larger downtrend.

Res: 1.0817; 1.0834; 1.0875; 1.0945.
Sup: 1.0766; 1.0700; 1.0667; 1.0635.

Interested in EUR/USD technicals? Check out the key levels

1. R3 1.0958
2. R2 1.092
3. R1 1.0848
PP 1.081
1. S1 1.0738
2. S2 1.07
3. S3 1.0629

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.