Euro is trading into near-term downtrend resistance after rebounding off confluence resistance last week. The immediate focus is on a break of the weekly opening-range which has taken shape just below – these are the updated targets and invalidation levels that matter on the EUR/USD price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro price setup and more.
Euro Price Chart – EUR/USD Daily
Technical Outlook: In my latest Euro Price Outlook we noted to be on the lookout for downside exhaustion as the EUR/USD was, “approaching the first major support hurdle at 1.0994.” Price registered a low at 1.0989 last week before rebounding sharply to post an outside-day reversal off the lows. The recovery is up nearly 1% with Euro now approaching longer-term downtrend resistance.
Daily support rests with the 75% parallel, currently around 1.1030s with a break below 1.0994 still needed to mark resumption of the broader downtrend. Ultimately a breach / close above the September highs at 1.1109 would be needed to validate a larger breakout in price targeting monthly open resistance at 1.1151.
Euro Price Chart – EUR/USD 120min
Notes: A closer look at Euro price action shows EUR/USD continuing to trading within the confines of a descending pitchfork formation extending October / November highs with price turning just ahead of the upper parallel early this week. The immediate focus is on a break of the weekly opening-range for guidance.
Initial support rests at 1.1051 ( weekly open at 1.1047) – look for a break there to threaten a larger pullback in price targeting the 61.8% retracement at 1.1027 and 1.1011– both levels of interest for possible downside exhaustion / long-entries IF reached. A topside breach of this formation / 1.1090 still must contend with key resistance at 1.1104/09 – look for a larger reaction there IF reached with a close above needed to validate a larger turn in price.
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Bottom line: The Euro recovery is trading just below near-term downslope resistance. From at trading standpoint, the advance may vulnerable while below the upper parallel but we’re looking for fade weakness while above 1.1011 with a topside breach ultimately favored. Review my latest Euro Weekly Price Outlook for a closer look at the longer-term EUR/USD technical trading levels.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Euro Trader Sentiment – EUR/USD Price Chart
- A summary of IG Client Sentiment shows traders are net-short EUR/USD – the ratio stands at -1.08 (48.08% of traders are long) – neutral reading
- Long positions are 8.71% lower than yesterday and 26.52% lower from last week
- Short positions are0.42% higher than yesterday and 24.94% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in Euro retail positioning are impacting trend- Learn more about sentiment!
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– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex