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The EURUSD pair is back under the 1.1300 level after forming a notable double-top pattern on the lower time frames after twice failing to move past the 1.1360 resistance zone.
You have to question the catalyst rally to the upside, as it was on the back on the ECB announcing that it would end emergency support as the end of March 2022.
But the downside seemed the correct move, as the FED talked up the prospect of more and quicker rates hikes last week, prompt a flight back into the greenback.
Last week, the ECB said that they need to ramp up the Asset Purchase Programme temporarily. The prospect of this should be enough to cause any rallies in the EURUSD pair to quickly fizzle this week as Omicron rages through Europe.
Additionally, the ECB raised its inflation forecast and lowered it growth forecast. This combining of weakening economic activity and higher price is probably not bullish for the eurozone economy.
So as the EURUSD starts to look weak again, the technical picture looks bleak while bulls are unable to make any new meaningful highs in the short to medium-term.
With the FED tightening QE, and the ECB ramping up purchases temporarily, clearly, we have central bank divergence, which is ultimately going to be detrimental to the single currency.
Sentiment is also starting to rise, which is a bad sign for bulls. Positive sentiment has increased since last week to 63 percent, despite the differences between both central banks. This is a big red flag for me this week and is likely to signal more losses.
EURUSD Short-Term Technical Analysis
The four-hour time frame continues to show that the EURUSD pair is struggling with the 1.1350 to 1.1360, further causing a double-top pattern.
Additionally, a triangle pattern had formed, with a break either side of the 1.1350 to 1.1260 price zone likely to cause the next big directional price move.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, we could likely see a final test of Ichimoku cloud resistance this week if bulls gain traction above the 1.1300 level.
If the EURUSD pair continues to hold under the 1.1300 level then a test towards yearly low could happen this month. Any weakness sustained under the 1.11900 level could spell heavy losses for the EURUSD pair towards the 1.1000 level.
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