- EUR / USD resumes declines to 16-month lows at 1.1264.
- Bearish flag detected on the 4-hour chart, awaiting confirmation to extend the decline.
- The RSI has rebounded from the oversold region, supporting the negative bias.
The EUR / USD pair is moving in a tight range above 1.1300, having halted its recovery from 16-month lows of 1.1264, while the recovery in Treasury yields is driving up demand for the USD overall.
Tepid market sentiment, in the face of lingering concerns about inflation and the global economic outlook, weighs on sentiment around the EUR while lending some support to the safe-haven USD.
Meanwhile, pessimistic comments from policy makers at the European Central Bank (ECB) remain a drag on the euro as it brings the monetary policy divergence between the Fed and the ECB back to the fore.
The focus is now on the ECB speeches and weekly data on initial US jobless claims to get fresh momentum in the pair.
From a short-term technical perspective, the recent selling that followed a short rally period has shown a bearish flag formation on the four-hour chart.
A four-hour candle close below the uptrend line support at 1.1308 will confirm the bearish continuation pattern, opening the doors for a retest of the yearly lows.
A breakout of this level will accelerate the decline towards 1.1200.
The RSI has recovered from the oversold territory, but remains well below the midline, which suggests that there is room for another move to the downside.
EUR/USD 4-hour chart
On the other hand, the recovery will gain momentum only after a firm break above the trend line resistance at 1.1348.
The next critical barrier to the upside is seen at the 21-period moving average at 1.1361.
Recapturing the 21 SMA is critical to denying the bearish bias in the short term.
EUR / USD additional levels
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