EURUSD is in a downtrend channel since the second quarter of 2021. Down moves usually started near the trend’s upper line with the breaking of shorter up trends or flat supports. MACD also gave sell signals relatively well but was a little late for all down waves in the channel.
Now, EURUSD formed a flat zone inside the trend channel. The price is slowly closing in the upper channel with the time effect. The flat zone is constrained between 1.1385 and 1.1230, which were the key support and resistance levels for more than 2 months.
For the fundamental side, EURUSD priced in most of the FED’s rate hikes for 2022 and maybe set up for one final down wave. Early inflation signals show a slight slowdown for the final month of the last year and just like FED, ECB is getting ready for small tapering in March. Rising covid cases might cause a slowdown and decrease the FED’s hawkishness. Despite all, markets already pricing in rate hikes which will put more pressure on EURUSD for some time.
As long as 1.1385 and 1.1445 resistances hold, one more wave to the lower line of the channel is more likely. Breaking of 1.1230 will be the main signal for such down moves. MACD sell signal could be followed as well for more secure selling opportunities. But downtrend might end in the first half of the year if ECB becomes more hawkish or FED decide to slow hiking rates. An up breakout may lead EURUSD to 1.18 in the medium term. Inflation data will be more important this year.
