EUR/USD Price Analysis: Choppiness in a 90-pips range signals volatility expansion ahead

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  • The shared currency bulls have cushioned around 1.0500 but the downside is still favored.
  • Formation of a Bearish Pennant chart pattern signals continuation of a downtrend.
  • Slippage of the RSI (14) below 40.00 will trigger a bearish bias ahead.

The EUR/USD pair is displaying back and forth moves in the early Tokyo session ahead of the Fed’s policy, which is likely to stretch its interest rates to tame the galloping inflation. A range-bound move in mid-1.0500s is signaling a contraction in the standard deviation, which will be followed by wild moves going forward.

On an hourly scale, EUR/USD is forming a Bearish Pennant chart pattern that displays the continuation of a bearish move after a consolidation phase. Usually, a consolidation phase after a bearish momentum denotes short buildups from those investors who prefer to enter a trade when a bearish bias sets in. The asset is consolidating in a tad wider range of 1.0490-1.0578.

The 200-period Exponential Moving Average (EMA) at 1.0608 is still scaling lower, which adds to the downside filters while the asset is hovering around the 50-EMA at 1.0525, which dictates a consolidation phase.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which signals a directionless move that will be followed by wider ticks and volumes.

Should the asset drops below last week’s low at 1.0471, a bearish trigger will drag the asset towards the round level support and 2017’s low at 1.0400 and 1.0340 respectively.

On the flip side, euro bulls can regain strength if the asset oversteps Friday’s high at 1.0593 decisively. This will send the asset towards April 27 high at 1.0655, followed by the round level resistance at 1.0700.

EUR/USD hourly chart