EUR/USD Stretches to Fresh Yearly Highs- Levels to Know From Here

2017-05-23 16:53:00

Talking Points

EURUSD rally vulnerable near-term sub-1.1285 - Broader outlook constructive above 1.1129
Updated targets & invalidation levels
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Technical Outlook:The euro rally failed just ahead of confluence resistance at 1.1285- a region defined by the 1.618% extension of the advance off the 2017 lows and a sliding parallel extending off the December high. So is this just near-term exhaustion? It’s too early to tell for sure, but the first level of interest for near-term support is being tested now at 1.1190 with the broader focus higher while above 1.1129. A topside breach targets initial resistance objectives at 1.1343 backed closely by 1.1366 and the 2017 high-day close at 1.1495.

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EUR/USD 120min

Notes: A closer look at price action sees the euro failing at the September high-day close at 1.1256 before pulling back today in U.S. trade. Initial support is eyed at 1.1190 with near-term bullish invalidation set to 1.1123/29- a break below this level would be needed to assert a more significant correction in the pair with such a scenario targeting the lower parallel / May opening-rang highs at 1.1021.

That said, from a trading standpoint he focus is on this pullback with a drop into support to offer more favorable long-entries. A third of the daily average true range (ATR) yields profit targets of 22-26pips per scalp. Economic data is rather light until late in the week but we do have the release of minutes from the latest FOMC rate decision on tap tomorrow and could fuel some added volatility in the USD crosses.

A summary of IG Client Sentiment shows traders are net-short EURUSD- the ratio stands at -2.52 (28.4% of traders are long)- bullish reading
Traders have remained net-short since April 18 when the pair traded near 1.0610- The pair has rallied 5.8% higher since.
Long positions are 26.0% higher than yesterday and 4.1% higher from last week
Short positions are 1.8% lower than yesterday but 5.2% higher from last week
Although sentiment continues to point higher, the recent build long-positioning warns of near-term exhaustion to the immediate up-trend as price approaches initial resistance levels. That said, the focus is on structural resistance heading into the 1.1285- with a breach there needed to validate a more meaningful breakout in the pair.

See how shifts in Euro retail positioning are effecting market trend- Click here to learn more about IG Client Sentiment indicators!

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