EUR/USD Price Outlook: Euro Constructive Above 1.14

2018-08-21 16:46:00 Michael Boutros

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EUR/USD Daily Price Chart
EUR/USD 240min Price Chart
EUR/USD Trader Sentiment
Relevant EUR/USD Economic Data Releases
Other Trade Setups in Play

Euro rebounded off slope support last week with the rally now targeting a key pivot zone. These are the targets & invalidation levels that matter on the EUR/USD charts.

EUR/USD recovery testing first major resistance hurdle- price remains constructive above 1.14
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Euro is testing a critical pivot range after rebounding off slope support last week at the 1.13-handle. Here are the updated targets and invalidation levels that matter on the EUR/USD charts heading into Jackson Hole this week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

EUR/USD Daily Price Chart

Technical Outlook: In my latest Analyst Pick, we highlighted a key weekly support barrier in EUR/USD around the 1.13-ahndle while noting that, “IF price is going to get a near-term recovery, this would be a good place to look- willing to play the long-side for now.” Euro has rallied more than 2% off the lows with the price now testing a critical pivot range at 1.1530/54 – a region defined by the 2016 high-close and the November low. Looking for a near-term reaction here.

A breach / close above this threshold is needed to fuel the next leg higher targeting the 50-line, just shy of 1.16, and the highlighted slope confluence around ~1.1660. Interim support rests at 1.1437/48 with bullish invalidation now raised to the low-day close at 1.1345.

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EUR/USD 240min Price Chart

Notes: Our ‘bottom line’ in last week’s Euro Scalp Report cited that, “The immediate short-bias is vulnerable heading into these support targets with a breach above 1.1448 needed clear the way for a larger recovery.” A closer look at price action further highlights this level as near-term support now with the risk still higher while above the weekly opening range lows. Initial topside resistance objectives at 1.1576 backed by 1.1652/60.

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Bottom line: Euro is testing the first major resistance hurdle on the back of last week’s reversal and could limit the topside near-term. From a trading standpoint, the immediate threat may be for a pullback but the outlook remains constructive while above the weekly open for now. I’ll favor fading weakness targeting a topside breach of this pivot range. Ultimately, a break / close below 1.1345 would be needed to mark resumption of the broader downtrend.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

EUR/USD Trader Sentiment

A summary of IG Client Sentiment shows traders are net-short EUR/USD - the ratio stands at -1.1 (47.6% of traders are long) – weak bullishreading
The percentage of traders net-long is now its lowest since July 3rd
Long positions are10.8% lower than yesterday and 19.1% lower from last week
Short positions are 19.7% higher than yesterday and 30.2% higher from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Euro 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.

See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!

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