The ongoing EURUSD crash is showing signs of slowing down as the price reached the lower line of the bearish trend channel. The overall outlook is still bearish for EURUSD, both technically and fundamentally. Extra dovish ECB versus getting more hawkish FED is the main driver of the downtrend while rising Covid-19 cases throughout Europe is just icing on the cake. The recent passing of Biden’s infrastructure program most likely push the US inflation higher and FED to be more hawkish.
Despite the overall negative outlook, in the short term, the price become too distant from the main moving averages, RSI entered oversold territory. A slight correction is long overdue. If EURUSD can hold within the trend, a correction to 1,14 or 1.1520 may happen in the near future. However, the risks are still on the downside.
1-week risk reversal turns to the upside and diverges from the spot price. A short-term correction has begun to be priced in the options market already. At the last divergence, EURUSD rose by %1.21. If a similar move will happen again 1.14 will be the likely target.
