EUR/USD double top bearish reversal confirmed ahead of Powell's Senate appearance
|- Bullish-to-bearish trend change confirmed.
- Powell likely to reiterate his positive view on the economy.
- Focus on core PCE
The EUR/USD closed yesterday below 1.2206 confirming a double top bearish reversal. The pattern indicates the rally from the Nov. 7 low of 1.1554 has ended and suggests scope for a drop to 1.1892 (target as per the measured height method).
The break of key technical support levels suggests the move lower may accelerate while heading into the weekend if the new Fed chair reiterates his upbeat view on the US economy during the Senate appearance later today.
Also, an above-forecast US Jan core personal consumption expenditure (core PCE), due at 13:30 GMT, would add credence to Powell's confidence on inflation and yield broad-based USD rally.
EUR/USD scenarios
Hawkish Powell and an above-forecast PCE could send the EUR/USD pair would allow deeper sell-off to supports at 1.2092 (Sept. 8 high) and 1.20 (major psychological support).
Meanwhile, a weaker-than-expected core PCE could weigh over US treasury yields and the US dollar, thus helping EUR/USD revisit resistance at 1.2260 (Feb. 22 low) and 1.23 (10-day MA).
EUR/USD Technical Levels
Valeria Bednarik, Chief Analyst at Valeria Bednarik writes, "technically, the pair is bearish and hovering around the neckline of a double-top figure of around 350 pips' height, not yet confirming it, but about to, which will theoretically implicate a decline of a similar extent. Short-term, and according to the 4 hours chart, the risk leans toward the downside, given that in the 4 hours chart, the pair is developing well below a bearish 20 SMA, which accelerates below the larger ones, while technical indicators pared their declines near oversold readings, rather reflecting the latest bounce than suggesting downward exhaustion."
Support levels: 1.2200 1.2165 1.2130
Resistance levels: 1.2240 1.2275 1.2310
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