BofA cautions that EUR/USD may be entering the latter, more volatile stage of its rally. Historically, the final third of euro uptrends tends to be choppier and more prone to corrections. Technical signals—including bearish momentum divergence and resistance near 1.16—suggest a potential pullback toward 1.1200–1.1065 before resuming higher toward long-term targets in the 1.18–1.20 range.
Key Points:
Late-Stage Rally Dynamics:
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EUR/USD rallies often begin with sharp, directional moves but become choppier in the final phase.
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2023’s euro rally serves as a model for such behavior.
Bearish Momentum Divergence:
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RSI divergence on the weekly chart is developing, indicating potential weakening in bullish momentum.
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This is a typical precursor to correction or consolidation, even within a broader uptrend.
Resistance at 1.16:
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On the daily chart, EUR/USD was repeatedly offered above 1.16, failing to close above it.
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This signals supply building in the 1.16s, reducing short-term upside momentum.
Summer Correction Risk:
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BofA sees a likely pullback to 1.1200 or even 1.1065, with the latter being the May low.
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A modestly higher low than May could confirm ongoing bullish structure with temporary weakness.
Long-Term View Unchanged:
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Despite short-term caution, BofA maintains a long-term target of 1.18–1.20, anchored by the 200-month SMA.
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Time horizon remains early 2026, with the current period seen as a technical digestion phase.
Conclusion:
BofA warns that EUR/USD may be in the choppier final stage of its rally, with bearish divergence and supply above 1.16 signaling possible summer consolidation. A pullback to 1.1200–1.1065 would be consistent with the pattern and not negate the longer-term bullish trajectory toward 1.20 by early 2026.
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