Where Is EUR/USD Heading From 1.05?
FxPro Financial Services Ltd | May 03, 2022 07:45AM ET
The EUR/USD has been hovering around 1.05 for the fourth day in a row, which is the last round level point before moving towards parity. This lull could be interpreted as an attempt by the bears to gain strength before a new decline, or it could indicate that the downside momentum is exhausted.
History and fundamentals suggest that a further downside move after a pause is more likely for now.
EUR/USD looks oversold by the RSI on the high timeframes above one day. However, history suggests that this oversold pattern appears in this pair at times of historical outlook reassessment, which is well within the current framework.
The EUR/USD has fallen for another four months since the Relative Strength Index touched 30 in 2014. It took more than two years for the pair to recover from the bottom. In 2000 it took nine months to reach the bottom, and it took 25 months before the reversal began.
The EUR/USD (assembled from the predecessor currencies to the euro) had an even more pessimistic history in the first half of the 1980s. It took nearly five years after first touching oversold in the monthly timeframes and reaching the bottom before reversing.
The reversal to the upside may be much quicker this time, but investors and traders should not lose sight of a very troubling historical observation. A consolidation of the single currency below 1.05 would cement a break of the seven-year support area. This may be the first step towards the lows of 2000-2002, at 0.8200-0.8500.
The bulls' ability to defend long-term support could inspire more buyers, sending EURUSD above 1.2200 as it did in 1998, 2017, and 2020.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.