EUR/USD Technical Highlights:
- EUR/USD remains stuck in a strong downtrend
- The recent push higher does provide some positive backdrop
- This week should bring better clarity, conviction
The EUR/USD remains stuck in a major macro downtrend, and while this outlook may not change broadly speaking there could still be some more upside before selling takes over again. Last week, the euro popped out above a channel it had been stuck in since the early part of the year.
We also saw a crossing of a swing high in the channel from earlier this month, so the breaking out of the channel and higher high may start an upward sequence. It is possible it was also the end of an a-b-c type rally, but the channel break gives some hesitation to that.
So does seeing what appears to have been a tradeable low in the US bond market, where yields appear poised to backtrack a little. This should generally be supportive of currencies and stocks. But keeping it simple with the techs in EUR/USD, there is some signs on its own that could lead to higher levels.
The current pullback could soon see price undergoing a test of support. A drop into the top of the recently broken channel line and a trend-line off the cycle lows will likely need to hold if the recovery outlook is to stay intact.
This support is roughly in the vicinity of 9835/9800. It would be a deep retracement for sure, but not overly concerning as long as support holds. A hold there could see a rise back above parity towards the 10200 level.
If, however, the a-b-c type scenario is in progress, then support is likely to only be a bump in the road for shorts, and a new cycle low shouldn’t be too far around the corner.
For now, the euro hangs in limbo as it has little in the way of meaningful levels. We may see a small swing-high around 9875 hold, but it isn’t viewed a significant level at this time. Ideally, for the upside to gain traction we see a strong rejection of the around closer to 9800. FOMC on Wednesday may help cement the price action being looked for.
EUR/USD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
