EUR/USD: Gains expected to falter but broader patterns raise the potential of EUR weakness ending - Westpac

Divergence on the spikes above 1.1250 and the sharp turn in daily momentum suggest deep retracements and a close above 1.1210 is needed to limit the downside for the EUR/USD pair, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“The initial 1.1000-25 retracement level should prove to be pivotal. Bias is now building for deeper retracements towards the Macron-gap (1.0740-1.0840)”

“Weekly

• Weekly momentum is turning from relatively extreme highs as EUR/USD faltered at 1.1300. The depth of slippage is critical for the month ahead
• As noted, retracements could extend, possibly as deep as the 1.05-1.06 area, before a base forms. A weekly close above 1.1300 may reduce these risks”

“Monthly

• The horizontal triangle/pennant is still dominant. After faltering at 1.1300, another slide to range lows is possible, but this could also define a basing pattern
• Monthly momentum is still distinctly supportive. Despite the broader neutral bias, the risk of developing an early base should not be ignored”