The US Dollar is having its best week in a month, as the selloff in riskier assets plagued the market all week. However, there has been a reprieve for the Euro this Friday, after it edged up against the Dollar by 0.15%. However, the EURUSD is still down 0.78% this week.
Weaker economic data and rising inflation, coupled with concerns that the Fed’s pace of rate hikes may exceed the market expectations, spurred a rush to the safe-haven greenback earlier in the week. This put the Euro, the Aussie Dollar and other risk-related currencies on a weaker footing heading into Friday’s session.
The sentiment in the market remains negative, and the emerging bearish flag pattern may further cement this sentiment in the weeks ahead.
The daily chart shows an evolving bearish flag pattern. Given the weakness of Friday’s uptick, rejection and a pullback from the 1.13789 resistance could spur a renewed onslaught at the flag’s lower boundary. A successful breakdown of this area opens the door for the bears to seek a measured move that could fall below the 1.1100 psychological pivot. Other targets above this area at 1.12389, 1.11882 and 1.11405 need to be taken out for the measured move to attain completion.
On the flip side, a breach of the flag’s upper border nullifies the bearish sentiment and opens the door towards upside targets at 1.15396 and 1.16028. For this flag violation to take place, the bulls must force the price above 1.13789 and 1.14653 (15 November 2021 and 13 January 2022 highs).