EURUSD Technical and Fundamental Outlook
Updated
First off, let's have a recap on the recent past of EURUSD:
After 2008 global economic crisis, EURUSD started its downtrend (Phase1), which is yet to be broken looking at the weekly and monthly timeframes. After 2014 (Phase2), FED started its quantitative tightening policy that pushed EURUSD further down in the following 2 years, resulted as a sharp fall from 1.399 to 1.034 by the end of 2016. Than FED stepped in an began its quantitative easing policy that pushed the price up to a new local high of 1.255 in the first quarter of 2018 (Phase3), which could easily be anticipated as a retracement move of the previous downward wave.
Since then, we experience a continued downtrend, which had a fakeout to 1.15 by the beginning of March as an early reaction to the CoronaVirus pandemic, triggered by President Trump's statements.
Coming down to a detailed look of the past 2 months:
After the bullish move to 1.15, prices tanked during March and made a local low at 1.064, which was a key consolidation range of Phase2 (as mentioned above). This was due to the worsening effects of CoronoVirus in Europe and Europe becoming the new epicenter, resulting in tight lockdown policies in many countries and sudden stop of the economic activity.
With the announcement of Fed's QE Infinity, we have seen a retracement to 1.11 levels. After this local high, prices formed a downtrend as seen on the 4h analysis.
Technical Outlook:
As the past week ended, prices made a new local low after the last retracement move and we see a clear daily reversal candle on Friday. We anticipate 4 possible scenarios for the next week onward.
Scenario1: This scenario considers the retracement of downward wave of 1.15 to 1.06 is yet to be continued and a second leg of retracement to the key resistance range of 1.121-1.124 is to be expected. Possible priceaction structure respecting the key supply zones are shown on the chart. After the completion of this retracement, Scenario1 anticipates the continue of downtrend in the coming months that will push the prices down to the range of 1.03-1.04. (4.000 pips up followed by 8.000 pips down) One can expect positive news flow from Euro area in the coming days to support this scenario. Anyhow, the midterm economic effects of Corona Crisis will be devastating and as the economic crisis deepen, a USD rally is expected in the near future, which will further push EURUSD down.
Scenario2:
As much as it seems less likely, Scenario2 anticipates the retracement was ended with the move up to 1.11 range and EURUSD will fail to break above the key resistance range of 1.087-1.09, whereas the newly formed 4h falling trendline is also crossing.
Scenario3:
Similarly with the Scenario2, Scenario3 anticipates a shortlived uptrend, which will reverse from the key supply range of 1.0975-1.10.
Scenario4:
Given the global economic conditions and the chaotic outlook in Europe, this scenario of continued uptrend to 1.15 range is highly unlikely but to be mentioned as a weak possibility nevertheless.
After 2008 global economic crisis, EURUSD started its downtrend (Phase1), which is yet to be broken looking at the weekly and monthly timeframes. After 2014 (Phase2), FED started its quantitative tightening policy that pushed EURUSD further down in the following 2 years, resulted as a sharp fall from 1.399 to 1.034 by the end of 2016. Than FED stepped in an began its quantitative easing policy that pushed the price up to a new local high of 1.255 in the first quarter of 2018 (Phase3), which could easily be anticipated as a retracement move of the previous downward wave.
Since then, we experience a continued downtrend, which had a fakeout to 1.15 by the beginning of March as an early reaction to the CoronaVirus pandemic, triggered by President Trump's statements.
Coming down to a detailed look of the past 2 months:
After the bullish move to 1.15, prices tanked during March and made a local low at 1.064, which was a key consolidation range of Phase2 (as mentioned above). This was due to the worsening effects of CoronoVirus in Europe and Europe becoming the new epicenter, resulting in tight lockdown policies in many countries and sudden stop of the economic activity.
With the announcement of Fed's QE Infinity, we have seen a retracement to 1.11 levels. After this local high, prices formed a downtrend as seen on the 4h analysis.
Technical Outlook:
As the past week ended, prices made a new local low after the last retracement move and we see a clear daily reversal candle on Friday. We anticipate 4 possible scenarios for the next week onward.
Scenario1: This scenario considers the retracement of downward wave of 1.15 to 1.06 is yet to be continued and a second leg of retracement to the key resistance range of 1.121-1.124 is to be expected. Possible priceaction structure respecting the key supply zones are shown on the chart. After the completion of this retracement, Scenario1 anticipates the continue of downtrend in the coming months that will push the prices down to the range of 1.03-1.04. (4.000 pips up followed by 8.000 pips down) One can expect positive news flow from Euro area in the coming days to support this scenario. Anyhow, the midterm economic effects of Corona Crisis will be devastating and as the economic crisis deepen, a USD rally is expected in the near future, which will further push EURUSD down.
Scenario2:
As much as it seems less likely, Scenario2 anticipates the retracement was ended with the move up to 1.11 range and EURUSD will fail to break above the key resistance range of 1.087-1.09, whereas the newly formed 4h falling trendline is also crossing.
Scenario3:
Similarly with the Scenario2, Scenario3 anticipates a shortlived uptrend, which will reverse from the key supply range of 1.0975-1.10.
Scenario4:
Given the global economic conditions and the chaotic outlook in Europe, this scenario of continued uptrend to 1.15 range is highly unlikely but to be mentioned as a weak possibility nevertheless.
Trade active
After we posted this analysis last weekend, EURUSD moved perfectly consistent with our predictions and tested the first range of 1.087-1.09, had a minor retracement and made its strong move to 1.10 range after breaking the falling trend. 1.10 was a psychological resistance level and we had a fakeout up to 1.102, which is what market makers always love to do to catch more liquidity of breakout traders.This week, we could expect a retracement back to the 1.087-1.09 range or even deeper to the 1.082 levels. As per our Scenario 1 suggests; we could expect the prices to reclaim the local high at 1.114 levels after this retracement.
If the stock markets crash, this retracement may turn into a strong impulsive wave down, activating our Scenario 3.
In any case, we will be cautiously watching how it will play out and try trade clear opportunities.
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