May 23, 2022

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Cryptocurrency strategy for the weekend of May 6-9, 2022

Bearish Outlook for EUR/USD Points to 20-Year Lows

The pair managed to recover from fresh five-year lows and returned to the 1.0400 mark with the help of improving market sentiment.

The euro fell to its lowest level since January 2017 at 1.0348 on Friday, but pared its losses for the day as the dollar faced an all-out correction, while US stock indices rose. With that said, EUR/USD is on the verge of posting its lowest weekly close since December 2002 around 1.0400.

Despite the “hawkish” hints from European Central Bank President Christine Lagarde, the divergence of monetary policy with the Federal Reserve is likely to continue to push the EUR/USD lower. The Fed has already begun its tightening cycle, and has more room to take tough anti-inflation measures than the European Central Bank, as the conflict between Russia and Ukraine has stronger economic implications for the European economy.

From a technical perspective, the EUR/USD is maintaining a negative bias according to the weekly chart. However, technical indicators point to oversold conditions, which may favor a consolidation phase or even a limited upward correction before another downside move.

EURUSD weekly

The daily chart presents a similar picture, although the RSI has already started correcting its oversold readings. The next downside target is seen at the January 2017 low at 1.0340. If the EUR/USD breaks below this level, it will trade at its lowest level since 2003, targeting the 1.0300 area.

EURUSD

On the other hand, short-term resistance can be found at the previous low around 1.0470, followed by the 20-day moving average at 1.0600. A recovery beyond this level seems unlikely at this time with no fundamental justification.

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Jorge Tobares
Financial Analyst at ProfitWay.