EUR/USD Bear flag formation

EUR / USD RATE TALK POINTS

EUR / USD seems to be trapped in a narrow range as it returns the advance after the Federal Reserve interest rate decisionand the exchange rate may continue to consolidate in the coming days as a bearish flag formation takes shape.

Euro forecast: EUR / USD bear flag formation

EUR/USD Bear flag: The euro / dollar has not moved much since the beginning of the week as the dollar benefits from worsening risk aversion, but new data is being released from the US. Shows the decline in inflation.

EURO FORECAST: EUR/USD BEAR FLAG FORMATION TAKES SHAPE

EUR/USD is little changed from the start of the week even as the Greenback benefits from the deterioration in risk appetite, but fresh data prints coming out of the US may produce headwind for the Dollar as the Consumer Price Index (CPI) is anticipated to show a slowdown in inflation.

The US CPI is expected. UU. is printing at 8.1% in April after expanding by 8.5% a year the previous month, and evidence of easing price pressures may keep EUR / USD within a defined range, as data suggest Federal Reserve effort to control inflation. the expected impact.

The US CPI is expected to print at 8.1% in April after expanding 8.5% per annum the month prior, and evidence of easing price pressures may keep EUR/USD within a defined range as the data suggests the Federal Reserve’s effort to tame inflation are having the intended impact.

However, the update may do little to deter the Federal Open Market Committee (FOMC) from normalizing monetary policy as chairman of the New York Fed. John Williamspermanent member with a vote in the FOMC, insists that the central bank “move quickly to bring the federal funds rate back to more normal levels this year“with the official continuing to say the committee is in a”way to increase the target rate of federal funds and reduce the balance sheett ”while speaking in the NABE / Bundesbank International Economic Symposium.

Nevertheless, the update may do little to deter the Federal Open Market Committee (FOMC) from normalizing monetary policy as New York Fed President John Williams, a permanent voting member on the FOMC, insists that the central bank will “move expeditiously in bringing the federal funds rate back to more normal levels this year,” with the official going onto say that the committee is on a “path of raising the target federal funds rate and reducing the balance sheet” while speaking at the NABE/Bundesbank International Economic Symposium.

Comments suggest the Fed is on a pre-set course like “there is a broad sense in the committee that additional increases of 50 basis points should be on the table at future meetings.”And divergent paths between the FOMC and the European Central Bank (ECB) may limit the recent recovery of the EUR/USD as chairman. Christine Lagarde and Co are preparing an exit strategy.

In turn, EUR/USD may face range bound conditions ahead of the next FOMC rate decision on June 15 as a bear flag formation takes shape, but a further recovery in the exchange rate may continue to alleviate the tilt in retail sentiment like the behavior seen during the previous year.

EUR/USD Bear flag

The IG Client Sentiment report shows 72.27% of traders are currently net-long EUR/USD, with the ratio of traders long to short standing at 2.61 to 1.

The number of net-long traders is 0.97% higher than yesterday and 6.43% lower than last week, while the number of net-short traders is 0.19% higher than yesterday and a 3.06% higher than last week. The decline in net long-term interest helped alleviate agglomeration behavior as 76.01% of traders were EUR / USD long net last week, while the increase in net short position occurs when the exchange rate returns the progress after the FOMC meeting. since the beginning of this month.

With that said, the update to the US CPI may keep EUR/USD within a defined range as inflation is expected to slowdown for the first time since August, but the consolidation may give way to a further decline in the exchange rate as a bear flag formation takes shape.

DAILY CHART OF EUR / USD RATES

EUR/USD Bear flag: The negative slope in both the 50-Day SMA (1.0856) and 200-Day SMA (1.1335) continues to cast a bearish outlook for EUR/USD, with the break of the 2020 low (1.0636) pushing the Relative Strength Index (RSI) into oversold territory as the exchange rate traded to a fresh yearly low (1.0471) in April.
Nevertheless, a textbook buy signal materialized in the RSI as EUR/USD reversed ahead of the 2017 low (1.0340), but a bear flag formation has taken shape amid the lack of momentum to close above the 1.0640 (78.6% expansion) region.
EUR/USD may trade within the continuation as it holds above the April low (1.0471), but a break/close below the 1.0500 (100% expansion) handle may push the exchange rate towards the Fibonacci overlap around 1.0330 (161.8% expansion) to 1.0370 (38.2% expansion), which lines up with the 2017 low (1.0340).