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Euro Price Outlook: EUR/USD Rally Eyes Resistance- Dollar at Risk

Euro Price Outlook: EUR/USD Rally Eyes Resistance- Dollar at Risk

2020-01-15 18:00:00
Michael Boutros, Strategist
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Euro Technical Price Outlook: EUR/USD Near-term Trade Levels

  • Euro pricerecovery targeting near-term confluence resistance – looking for a reaction just higher
  • EUR/USD close above 1.1209 needed to mark larger breakout in price
  • Trade outlook remains constructive near-term while above 1.11

Euro reversed sharply off confluence support last week with the recent recovery against the US Dollar now targeting a longer-term key resistance pivot we’ve been tracking for months. These are the updated targets and invalidation levels that matter on the EUR/USD price charts this week. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro trade setup and more.

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Euro Price Chart – EUR/USD Daily

Euro Price Chart - EUR/USD Daily - Euro vs US Dollar Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; EUR/USD on Tradingview

Technical Outlook: In my last Euro Weekly Price Outlook we noted that Euro had, “responded to key weekly resistance and the focus is on this pullback early in the month. IF this is corrective, losses should be limited to the 1.10-handle. From a trading standpoint, look for downside exhaustion on stretch towards the lower parallels for possible entries.” Price rebounded off confluence support at 1.1080/91 last week (low registered at 1.1085) – a region defined by the 100% extension of the decline off the December high & the 61.8% retracement of the late-November advance and converges on the 61.8% parallel of the ascending pitchfork formation we’ve been tracking off the 2019 lows.

Key daily resistance remains at 1.1186-1.1209 – a breach / close above the yearly open at 1.1222 would be needed to validate a larger-scale breakout in EUR/USD with such a scenario eyeing initial targets at the August high at 1.1250 and the 100% ext at 1.1282. Broader bullish invalidation now raised to the lower parallel, currently ~1.1050s.

Euro Price Chart – EUR/USD 120min

Euro Price Chart - EUR/USD 120min - Euro vs US Dollar Trade Outlook - Technical Forecast

Notes: A closer look at Euro price action sees EUR/USD trading within the confines of a near-term descending pitchfork extending off the December highs with an embedded channel governing the most recent advance off Fibonacci support. Initial resistance objectives at 1.1166 and 1.1180/86 – look for a more significant reaction there IF reached. Subsequent topside targets at 1.1208 and the 1.1222 in the event of a breach. Initial support rests at 1.1125 backed by near-term bullish invalidation at 1.1107/09- a break below this threshold would risk another test of critical support at 1.1080/91.

EUR Forecast
EUR Forecast
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Bottom line: The immediate focus is on a reaction as the Euro recovery approaches initial resistance objectives just higher. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops on a stretch into the upper parallels- look for a bigger reaction there IF reached. Watch for possible downside exhaustion on pullbacks while within this channel- losses should be limited to 1.11 IF price is indeed heading higher on this advance. Ultimately, failure to close the week above 1.12 may offer a larger correction / more favorable long-entries on a re-test of longer-term trendline support – stay nimble up here.

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

Euro Trader Sentiment – EUR/USD Price Chart

Euro Trader Sentiment - EUR/USD Price Chart - Euro vs US Dollar Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long EUR/USD - the ratio stands at +1.27 (55.89% of traders are long) – weak bearish reading
  • Long positions are 5.63% lower than yesterday and 24.56% higher from last week
  • Short positions are1.32% higher than yesterday and 3.82% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed EUR/USD trading bias from a sentiment standpoint.
EUR/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -11% 6% -1%
Weekly -13% 16% 4%
Learn how shifts in Euro retail positioning impact trend
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Key Euro / US Data Releases

Euro / US Key Data Releases - EUR/USD Economic Calendar - Euro vs US Dollar Trade Outlook

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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