EUR/USD fell on Friday from the resistance of 4/8 of Murray at 1.1474 to the key level of 1.1400. Early in the American session, the pair is bouncing above 1.1400 and below the 21 SMA located at 1.1430, trying to recover part of the loss.
The outlook remains bearish according to the 4-hour chart as we see the formation of an inverted pennant pattern. Confirmation of this pattern could send the euro to drop below 1.14 towards the key support of 2/8 Murray located at 1.1352.
As the euro continues to trade below 1.1430 (SMA 21), bearish pressure is expected to increase and EUR/USD could break the level of 1.14 for an acceleration of the decline towards the 200 EMA located at 1.1352.
The US dollar index (USDX) is recovering from the sharp drop that occurred last week. On Friday, the technical bounce started after reaching the low of 94.58. The index is now trading above the 21 SMA (95.00) which represents a positive bias for the US currency. If in the next few hours, the index consolidates above 94.92 (3/8), it is expected to continue the upward movement with targets towards 95.70 (200 EMA).
As long as the recovery of the dollar index continues, the euro will be under downward pressure and we expect a downward correction towards the 200 EMA (1,1352) and towards the 1/8 Murray at 1.1291.
Since January 13, the Eagle indicator is giving a negative signal. It is likely that in the next few days the euro will remain bearish below 1.1430, so it will give us an opportunity to sell.
The market sentiment report for today, January 17, shows that there are 56.15% of traders who are buying the EUR/USD. This is a negative signal and this represents a probability of a bearish move in the medium term towards the level of 1.12.
If this figure increases, the euro could lose the possibility of reaching the 1.15 level and will make a turnaround towards 1.12 and even the psychological level of 1.10.
Support and Resistance Levels for January 17 - 18, 2022
Resistance (3) 1.1502
Resistance (2) 1.1464
Resistance (1) 1.1431
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Support (1) 1.1380
Support (2) 1.1347
Support (3) 1.1296
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Scenario
Timeframe H4
Recommendation: sell below
Entry Point 1.1400
Take Profit 1,1352 (200 EMA)
Stop Loss 1.1442
Murray Levels 1.1474 (4/8) 1.1413 (3/8) 1.1352 (2/8)
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