The euro nearly fell to a new yearly low against the US dollar currency last week due to concerns about aggressive interest rate hikes from the Federal Reserve and other global central banks.
Many traders sold riskier asset classes as they fell that the rate hikes could push the global economy into a recession. Geopolitical issues such as Taiwan and Ukraine also spooked investors.
More big moves should be expected this week and we could see the euro currency breaking down further as investors get a chance to listen to Federal Reserve Chair Jerome Powell’s latest thinking.
Chair Powell is scheduled to testify before Congress on Wednesday and Thursday. He will likely stick to the playbook from last Wednesday, as little has changed since the latest rate decision.
Economic data will be very important going forward. The effort from the Fed to slow the US economy at the same time as growth is slowing will continue to raise concerns. Retail sales and jobs are both now turning south.
I think based on the bearish fundamentals, and the bearish the EURUSD pair could soon be trading below parity. Much will depend on the global economy and also the ECB and the FED.
Something that is good for the downtrend right now is that traders are currently nearly totally neutral towards the EURUSD. Sentiment is flat while the EURUSD pair looks lower.
The ActivTrader Market Sentiment tool shows that some just 52 percent of traders are bullish towards the EURUSD. This is suggesting for more price consolidation this week and may even in June.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has been trading in a range and has formed both a large head and shoulders pattern, and a double-bottom patter.
The large head and shoulders pattern will be activated if the price moves under 1.0350. Watch out for a further crash below parity in the EURUSD pair if we see a move below 1.0350.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things only look bad for the EURUSD pair has moved convincingly above the 2020 swing low, just or slightly above the 1.0500 level.
If the EURUSD pair continues to hold and moves under the 1.0600 area this week, then watch for an attack towards the 1.0350 region and more likely than not towards and under parity.