After 7 straight sessions down, the Euro may take a short break around current levels before diving in search of new lows. Indications from Sequential suggest that the movement is starting to overheat, printing 7s and 11s. The downward movement is likely to continue for another 2-3 sessions until it absorbs all the orders around the current levels and completes the Sequential cycle. In addition, the price is near the lower limit of the descending channel and the DeMarker Oscillator is entering the Oversold zone, which is likely to accelerate the downward movement in the next few sessions.
The fundamentals are still on the side of the dollar. The Fed continues to be more hawkish than the ECB. Preliminary CPI data from the Eurozone is expected on Friday, with inflation expected to rise to 9.7% from 9.1%. If the data becomes a fact, the ECB is likely to take a more aggressive approach to tightening, which will temporarily delay the fall of the Euro. However, a serious correction is unlikely to materialize due to the continued negative outlook for the Eurozone economy.
I expect a short-term slight recovery to the 0.965 – 0.985 zone in the coming weeks, followed by another downward momentum towards the levels around 0.93. The trend remains downward and short positions are predominant. A correction to 0.965 – 0.985 will enable a short position with a good R/R ratio.
Average bank expectations suggest bottoming out in Q4 and the start of a euro recovery next year.
For the next quarter, the banks expect the price to stay around the levels 0.96 – 0.99 with weak prospects for reaching 1.02. This supports the potential correction after the decline.
Weekly forecasts suggest a wide range between 0.935 – 0.975, with estimates around the upper bound more, suggesting a higher probability of a slight upside rather than a continuation of the decline.
A break of the main descending channel in an upward direction will signal a change in the medium-term trend.
The stop loss zone is above the last peak, outside the channel, measured against the size of the margin account.
Dealer Anatoliy Pavlov