EUR/USD is without any doubt on a bearish channel since the beginning of 2021, however we believe the rate is laying down the foundations for a possible recovery going into 2022.
The rate is currently trading at 1.12-1.13, a level that acted as strong resistance during the years 2015-2017 and 2019-2020 and it is now a strong support level: interesting to note that in June 2020, the rate consolidated between those two levels before bouncing to a bullish upside.
Looking at both MACD and RSI we confirm they are overextended to the downside: MACD is at a level only seen in February 2020 and RSI is on a strong divergence with the price and only recently moved out from the oversold territory.
By analyzing the support and resistance levels, the current fluctuation can be explained as a backtest of the previous resistance, now support. This level also coincides with the lower end of the descending channel.
Looking at the previous swings, we could expect a bullish movement at least up to 1.1500: it will be at this level that the bearish channel will break or a continuous decline will occur.
Over the longer term, we are in favour of a break of the bearish channel and reach 1.2000 towards the middle of 2022.
Taking into consideration a weekly time frame, the importance of the current support level is even more relevant.
In July 2020, the EUR/USD managed to break the bearish trend line in place since August 2008 and it is not backtesting such trendline.
On a weekly time frame, both MACD and RSI are overextended to the downside leading us to think that a possible recovery is indeed on the table.
In addition, the rate is making lower lows from 2017: 1.0300 1.0635 and the latest 1.1200
To conclude, the trend is still bearish on both weekly and daily timeframes however, we believe that the area of 1.1200 - 1.1300 could be a reasonable turning point looking at previous swings as well as support and resistance levels that alternate since 2015.
For the upcoming 2022, we are in favour of a bullish recovery and we set the following targets
OTB Global Investments
1 December 2021