EUR/USD outlook: Overall picture is bearish but headwinds continue to slow the action

EUR/USD

EURUSD keeps negative tone, but near-term action seems to be lacking firmer direction signals.

Wednesday’s strong upside rejection left a daily candle with long upper shadow and formed a bull-trap above 10 DMA, signaling strong bearish pressure, but long lower shadows on daily candles of Thursday / today, suggest that bears face headwinds from immediate support at 1.0611 (Fibo 38.2% of 0.9535/1.1275 uptrend and nearby top of thickening weekly Ichimoku cloud (1.0553).

Although the pair is on track for the tenth consecutive weekly close in red, the action of this week is shaped in Doji candle which signals indecision and may result in extended consolidation above 1.0611 Fibo support.

However, potential consolidation should not be long-lasting and likely limited as technical picture on daily chart is firmly bearish and negative outlook reinforced by bearish fundamentals as latest economic data added to signals that euro zone economy will likely contract in the third quarter, with unclear signs when the economy will return to growth.

This fuels expectations for bearish continuation scenario on break of 1.0611/1.0553 pivots and attack at next key target at 1.0516 (Mar 15 low) break of which would expose supports at 1.0405 (50% retracement) and 1.0295 (weekly cloud base).

Falling 10DMA offers initial resistance at 1.0686) which should ideally cap upticks and keep intact falling 20DMA (1.0736) violation of which would put larger bears on hold and unmask upper pivot at 1.0828 (200DMA).

Res: 1.0686; 1.0700; 1.0736; 1.0779.
Sup: 1.0611; 1.0553; 1.0483; 1.0405.

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