- EUR/USD rally eyeing initial topside targets- Outlook constructive while above monthly open
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Euro has rallied nearly 1.4% after rebounding off key confluence support last week and the medium-term outlook remains weighted to the topside while above the April open. The advance is approaching some near-term resistance targets that may offer a pullback in price- here are the levels to know.
EUR/USD Daily Price Chart
Technical Outlook: In this week’s Technical Perspective, we highlighted a confluence support zone in EURUSD around ~1.2230 where basic channel support converges on the 61.8% extension of the decline off the yearly highs. Price posted an outside-day reversal off this level with the rally breaking back above the monthly open / opening-range highs. Daily resistance targets are eyed at the 2018 high-day close at 1.2709 backed by the January trendline resistance ~1.2440s- a breach above this levels would be needed to mark resumption of the broader uptrend. Key support now back at the low-day close at 1.2279.
EUR/USD 120min Price Chart
Notes: A closer look at price action see’s EUR/USD trading within the confines of an ascending channel formation extending off the monthly lows and keeps the immediate focus higher while channel support. Interim resistance targets stand at 1.2409 backed by the slope confluence around ~1.2440.
Interim support is eyed at 1.2346 backed by the monthly open at 1.2320- both areas of interest for exhaustion / long-entries. Near-term bullish invalidation rests with the monthly low-day reversal close at 1.2279- a break there would suggest the broader correction is still underway and risks a drop towards 1.2230 & or even 1.2167.
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Bottom line: Euro has rebounded from BIG weekly support and we’ll favor fading weakness while above the monthly open. Ultimately a breach above 1.2440s would be needed to fuel the next leg higher. Note that near-term momentum is still deep in overbought territory and we’ll be looking for a pullback to offer re-entry.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
EUR/USD IG Client Positioning
- A summary of IG Client Sentimentshows traders are net-short EURUSD- the ratio stands at -1.52 (49.7% of traders are long) – bullishreading
- Long positions are 13.6% lower than yesterday and 7.6% lower from last week
- Short positions are 3.2% higher than yesterday and 10.9% higher 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 rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger EURUSD-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant Data Releases
Other Setups in Play
- GBP/JPY Price Analysis: Rally Testing Key Resistance Barrier
- Weekly Technical Outlook: Pending U.S. Dollar Trade Setups
- USD/CAD Technical Outlook: Trade Setups for NFP, Canada Jobs
- AUD/JPY Price Analysis: Is the Correction Over?
- AUD/USD Technical Outlook: Price Tests Critical Uptrend Support
- Written by Michael Boutros, Currency Strategist with DailyFX
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