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Euro Short-term Technical Outlook: EUR/USD Pops Parity- ECB on Tap

Euro Short-term Technical Outlook: EUR/USD Pops Parity- ECB on Tap

Michael Boutros, Strategist

Euro Technical Price Outlook: EUR/USD Short-term Trade Levels

  • Euro updated technical trade levels – Daily & Intraday Charts
  • EUR/USD breakout of 2022 downtrend eyes first major hurdle – ECB on tap
  • Support 9950s, 9871, 9782 (key)– Resistance 1.0095-1.0121, 1.0197(key)

Euro surged more than 5.3% off the yearly low with a breakout of the 2022 downtrend threatening a larger rally in the days ahead. That said, the advance is now approaching the first major resistance hurdle and the first real test of bulls resilience on this recovery from multi-decade lows. These are the updated targets and invalidation levels that matter on the EUR/USD technical price charts heading into the European Central Bank (ECB) interest rate decision. Review my latest Strategy Webinar for an in-depth breakdown of this Euro technical setup and more.

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Euro Price Chart – EUR/USD Daily

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Chart Prepared by Michael Boutros, Technical Strategist; EUR/USD on Tradingview

Technical Outlook: In my last Euro Short-term Price Outlook I noted that EUR/USD had, now approaching yearly downtrend resistance into the start of the month / quarter – looking to possible exhaustion / price inflection in the days ahead for guidance.” Indeed prices failed / marked the monthly opening-range highs into confluent resistance at parity early in the month before pulling back. Yesterday’s breach above yearly channel resistance / the October opening-range highs threatens a larger recovery here with Euro attempting to break back above parity today- watch the close.

Euro Price Chart – EUR/USD 240min

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Notes: A closer look at Euro price action shows EUR/USD trading within the confines of a short-term ascending pitchfork formation extending off the September / October lows with advance testing the 75% parallel early in US trade. Initial support rests back at the median-line (currently ~9950s) backed by the weekly open at 9871. Short-term bullish invalidation now raised to the monthly open at 9782.

A push higher from here keeps the focus on the 100% extension of the late-September rally / September high-day close at 1.0095-1.0121 with the upper parallel eyed just higher- look for a larger reaction there IF reached. Keep in mind that if the rebound off the 1989 low is simply corrective, the advance would need to be halted at these levels- decision time for the bulls. Ultimately, a breach / close above the September highs at 1.0197 would be needed to suggest a more significant low was registered last month / a larger trend reversal is underway towards the 2016 low / 2016 low-day close at 1.0352/85.

EUR Forecast
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Bottom line: A breakout of yearly downtrend resistance / the October opening-range highs threatens a larger recovery in EUR/USD in the days ahead. From a trading standpoint, losses should be limited to the weekly open IF price is heading higher on this stretch with the immediate focus on a reaction into the 1.01-handle for guidance- a good region to reduce portions of long-exposure / raise protective stops. Keep in mind the ECB rate decision is on tap tomorrow followed by US core inflation data (PCE) on Friday and the FOMC next week – needless to say, expect volatility and stay nimble here. Review my latest Euro Weekly Price Outlook for a closer look at the longer-term EUR/USD technical trade 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

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  • A summary of IG Client Sentiment shows traders are net-short EUR/USD - the ratio stands at -1.09 (47.75% of traders are long) – typically neutral reading
  • Long positions are 10.90% lower than yesterday and 14.29% lower from last week
  • Short positions are 3.53% lower than yesterday and 9.43% 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.
EUR/USD Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% 1% -1%
Weekly 3% 7% 5%
Learn how shifts in Euro retail positioning impact trend
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- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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