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EUR/USD: Staying trend bearish - BAML

According to Paul Ciana, Technical Strategist at BofA Merrill Lynch, the October range/right shoulder breakdown suggests EUR/USD should decline to at least 1.15 however the H&S top technically targets 1.1320.

Key Quotes

“The range breakdown also broke the neckline of a larger head and shoulders top, which we reported on in early October, confirming spot could decline further. Note the 200d SMA is rising towards the 1.1320 target level.”

“Given the rally from the 1.0341 low to the 1.2092 high, a 38.2% retracement of 1.1423 isn’t asking for much while a 50% retracement to 1.1216 is a common event. A deeper retracement to the 61.8% retracement at 1.1010 is not clear.  If this is wave C of the decline from the 1.2092 high, then an equal C measures to 1.1455 while a deep C measures to 1.1197. These figures are pretty close to the larger Fibonacci retracement.”

“Technically we prefer to sell intraday rallies up to the declining resistance lines and would continue to carry a short position for the downtrend underway. Soon, trend line resistance and the 50d SMA will slope lower adding to resistance in the 1.171.18 area and sweetening the risk/reward to new shorts. We would expect these technical resistance lines to hold to remain bearish.”

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