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EUR/USD Price Outlook: Euro Breakout Imminent- Battle Lines Drawn

EUR/USD Price Outlook: Euro Breakout Imminent- Battle Lines Drawn

Michael Boutros, Strategist

Euro is virtually unchanged for the month of December with price continuing to trade within the confines of a multi-month consolidation structure. These are the updated targets and invalidation levels that matter on the EUR/USD chartson the heels of today’s European Central Bank (ECB) interest rate decision. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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EUR/USD Daily Price Chart

EUR/USD Daily Price Chart

Technical Outlook: In my latest EUR/USD Weekly Technical Outlook we noted that, “the monthly opening range has taken shape just above confluence support and we’re look for the break for guidance. From a trading standpoint, the broader short-bias remains at risk while above this level and for now, I’ll be on the lookout for possible price exhaustion on a move towards 1.13 again.

Euro registered a low at 1.1306 this week before rebounding with the monthly opening-range still intact post-ECB. Note that the broader consolidation structure off the November range remains in focus with the broader short-bias vulnerable while above this week’s low.

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EUR/USD 240min Price Chart

EUR/USD 240min Price Chart

Notes: A closer look at price action highlights sees euro continuing to trade within the confines of the ascending pitchfork formation we’ve been tracking off the yearly lows with price rebounding sharply off confluence support this week at 1.1308. Price would need to hold above the highlighted slope confluence around ~1.1320 for the advance to remains viable.

Weekly open resistance stands at 1.1390 with a breach above the December opening-range highs at 1.1443 needed to validate the breakout- such a scenario targets 1.1472 backed by the 1.15-handle and more significant Fibonacci resistance at 1.1516/24.

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Bottom line: Price is responding to multi-month consolidation support and IF euro is heading higher, price would need to stabilize here above the 1.13-handle. From a trading standpoint, I’ll favor fading weakness while above this threshold but ultimately a breach above 1.1443 is needed to suggest a larger advance is underway. A break sub-1.1308 would invalidate the rebound play and expose 1.1270 backed by critical long-term Fibonacci support at 1.1187.

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

EUR/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long EUR/USD - the ratio stands at 1.17 (54% of traders are long) – neutralreading
  • Traders have remained net-long since November 23rd; price has moved 0.3% lower since then
  • Long positions are13.4% lower than yesterday and 8.0% lower from last week
  • Short positions are 16.2% higher than yesterday and 5.5% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Euro prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

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

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Relevant EUR/USD Data Releases

EUR/USD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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

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