EUR/USD Could Retest 1.17 if the 1.18 Cap Holds Firm

Summary:

The EUR/USD could be set for a retest of the 1.17 support, if the 1.18 psychological cap holds firm, even as it is tested by bulls on Friday.

Following a series of speeches at the Jackson-Hole event by Fed policymakers, the US Dollar weakened slightly on the day. Credit Suisse has lent its voice to the pair’s reaction to recent events surrounding tapering. The pair is seen to be capped at 1.1806/1.1831, and this could lead to a conclusive break of support at 1.1703/1.1695. A move lower confirms the large head and shoulders pattern to open the door towards the 1.1663/1.1632 September 2020 low and 1.1612/1.1604 November 2020 low.

However, a break of 1.1831 could open the way towards a recovery that targets 1.1894/1.1910. The pair is up 0.33% as of writing.

EUR/USD Technical Outlook

The breakout move from the falling wedge appears to be taking hold with a strong bounce off the 1.17505 support. This candle forms a bullish engulfing pattern along with Thursday’s candle. Friday’s move has tested resistance at 1.18008. Bulls need to uncap this level for the advance to continue to the price objective of 1.18927. 1.18395 has to give way for this objective to be achieved.

On the other hand, a pullback from Friday’s rejection at 1.18008 could lead to a retest of the 1.17505 support. A further decline tests 1.17036, with 1.16527 lining up as an additional target down south.