EURUSD could retrace the majority of the 2021-2022 decline – BofA

Economists at the Bank of America Global Research discuss EURUSD’s technical outlook. In their view, a dip towards parity followed by a bounce to 1.0350/75 would confirm a head and shoulders top.

New highs in RSI are a favorable condition for a bottom pattern to form

“A technical bottom pattern would go a long way in supporting the potential for further gains in the EURUSD next year. One pattern to be on watch for is a head-and-shoulders bottom. If we assume the neckline of the pattern is 1.0350, then the left shoulder and head of the pattern have already formed. While below this, the right shoulder may begin to form.” 

“A dip near parity (the next few weeks) and then a rally above the proposed neckline at 1.0350/1.0375 would confirm a head-and-shoulders bottom. The bullish pattern measurements would imply a majority of the 2021-22 decline could be retraced, such as 1.0750, 1.0935/1.10 and possibly the 1.12s. The new highs in Relative Strength Index (RSI) are a favorable condition for a bottom pattern to form.”