Bearish flag, oversold conditions warrant caution

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  • EUR / USD trades with losses near 14-month lows below 1.1600
  • The USD regains ground as end-of-quarter cash flows come into play.
  • EUR / USD is moving inside a bearish flag on the 4-hour chart amid an oversold RSI.

EUR / USD is seeing a new selling episode at the start of the European session on Thursday, with the US dollar looking to regain its recent strength.

The renewed rally in U.S. Treasury yields is helping the USD reverse its pullback from multi-month highs amid the underlying narrative of increased price pressures and the Fed’s normalization of monetary policy earlier than expected.

Looking ahead, US final GDP and Fed Chairman Jeome Powell’s testimony will focus investors’ attention for a new trade boost. However, month-end and quarter-end cash flows are likely to remain in play.

From a short-term technical perspective, Thursday’s sell in EUR / USD is moving within a bearish flag pattern on the four-hour chart.

It is a bearish continuation formation, with a break below the uptrend line support at 1.1595 needed to validate the pattern.

EUR/USD 4-hour chart

If the breakout is achieved, a decline towards the 1.1500 level cannot be ruled out. However, the RSI is well within the oversold territory, suggesting that the pair could witness a rebound.

Any recovery attempt could hit initial resistance at the 1.1650 psychological barrier, above which the August lows of 1.1664 could be challenged, around where the 21-period SMA currently sits.

EUR / USD additional levels

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