EUR/USD: Is the Decline Over?

  • EUR/USD rallied around 200 pips after rebounding from lows.
  • A triangle setup shows an upcoming reversal.
  • The parity zone is crucial for detecting a bottom since the market would breach the triangle’s b-d trend line.

EUR-USD rebounds from its lows as we end the month and trading week. The currency surged double-digits yesterday, rallying by 200 pips without solid reasons. Indeed, United States stocks rebounded. That was enough for a rally, though EUR-USD’s rally outshined its peers.

Naturally, contrarian traders might wonder whether we are at a bottom. From a fundamental standpoint, three factors support the rally in EUR/USD. What about the technical view?

The Obvious is Always Wrong

In this context, it means anything obvious within the markets is something everyone knows. Thus, efficient market individuals should price it in. Investors should recognize unusual patterns whenever resorting to a technical approach. Also, enthusiasts should watch for fundamental aspects that could shift before others.

We have heard about the euro primed to fail amidst the 2008-07 monetary crisis. Yet the currency is here. So, are we dealing with a similar case? Indeed, everyone is talking about the euro’s weakness, considering Europe’s geopolitical events and multiple risks.

Meanwhile, the current levels confirm it rebounded by nearly one hundred pips from its lows. Nevertheless, the present rebound is minuscule, considering the sharp plummets from levels above 1.20.

However, the technical outlook appears encouraging. Purchasing here remains risky, though market players should concentrate on the parity zone. A move beyond parity indicated an end of a triangular formation. The bottom should appear by the time the pair breaches the b-d trend-line.

Economic Data

This week’s data had market pricing in another 75 basis point hike by ECB (European Central Bank_ during its upcoming financial meeting on October 27.

The bank runs out of choices even with the growing chances of a recession. Meanwhile, ECB officials trust more rate hikes are necessary to combat soaring inflation.

Yesterday’s 1hr analysis revealed EURUSD hit the resistance at 0.98500, and a pullback appears possible. The pair seems primed to retest the support at 0.9750 before plummeting towards 0.9640. Meanwhile, the 20-50-100SMA might offer a foothold to the downturn, triggering another upside.

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