EUR/USD Rally Vulnerable Ahead of NFP- Pullback to Offer Opportunity

2017-08-01 17:30:00 Michael Boutros

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Talking Points

Euro rally at risk sub-1.1876- broader outlook remains constructive
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EUR/USD Daily Chart

Technical Outlook: Euro stretched into the pitchfork resistance yesterday, capping the weekly advance near-term. The 2010 low comes in just higher at 1.1876- the long-bias is at risk heading into these levels and we’re on the lookout for possible near-term exhaustion into the August open.

Interim support rests along the 75% line around (currently ~1.17) with broader bullish invalidation steady at the 2016 high-day close at 1.1495. In the event of a topside breach, look for resistance targets at the longer-term median-line extending off the February highs (currently ~1.2040) backed by 1.2167.

Learn more about Pitchfork & Median-line formations in Michael’s three-part trading series

EUR/USD 120min Chart

Notes: An embedded ascending channel off the 7/13 low further highlights the aforementioned resistance levels with immediate support eyed at last week’s high at 1.1777 backed by 1.1714. A break below the figure is needed to suggest a larger correction is underway targeting 1.1616 & the median-line (currently ~1.1540).

Keep in mind we still have the release of U.S. Non-Farm Payrolls (NFP) on Friday which could offer a good deal of volatility in the USD crosses. From a trading standpoint, I’m looking for near-term exhaustion up here but ultimately, we’d be looking for long-entries on a more meaningful pullback into structural support.

A summary of IG Client Sentiment shows traders are net-short EUR/USD- the ratio stands at -2.7 (27.0% of traders are long) – bullishreading
Retail traders have been net-short since April 18th- Price has moved 10.6% higher since then
Long positions are 12.0% higher than yesterday and 3.2% higher from last week
Short positions are 4.8% lower from yesterday and 7.9% lower from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rally. That said, retailless net-short than yesterday and compared with last week and the combination of current positioning and recent changes warn that the current Euro price trend may soon reverse lower despite the fact traders remains net-short.

What to look for in EUR/USD retail positioning - Click here to learn more about sentiment!

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