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The EURUSD pair had another very bearish week on the foreign exchange market, as traders continue to flock to the greenback amidst expectations that the FED will soon hike interest rates.
Another interesting aspect has entered into the fray as some European nations announced harsh lockdowns last week, further dampening the eurozone’s economic outlook.
The EURUSD pair is now caught in a perfect storm of US dollar strength and weakening fundamentals, meaning that the bearish trend is more likely that not set to continue.
Looking at the weekly price close for the EURUSD pair it also sets the stage for more technical weakness, with the 1.1250 and 1.1140 level the next big bearish target prior to the 1.1000 level.
Should we see risk-off sentiment increasing, it is also likely to ramp up euro selling. Let us not forget that when COVID-19 hit nearly two-years ago the reaction was to buy the US dollar and sell stocks.
Sentiment is also raising a big red flag, as traders are still increasing bullish towards the single currency, despite the technicals and fundamentals being very negative.
The ActivTrader Market Sentiment tool shows that some 84 percent of traders are bullish towards the EURUSD. This sentiment metric has just continued to increase over recent weeks.
EURUSD Short-Term Technical Analysis
The four-hour time frame continues to show that the EURUSD pair has reached the downside target of large a head and shoulders pattern.
Upside failure around the 1.1350 level would likely see more downside this week in terms of swing areas. The 1.1250 level is a solid bearish target for swing traders.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame a large head and shoulders pattern continues to loom, with the pattern holding a downside projection of over 800 points.
If the EURUSD pair continues to hold under neckline resistance, around the 1.1540 area this week, then more weakness towards the 1.1140 or 1.1000 area could be coming over the medium-term.
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