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Euro Price Action Analysis: EUR/USD Breaks Out - More Room to Run?

Euro Price Action Analysis: EUR/USD Breaks Out - More Room to Run?

2020-02-27 13:30:00
James Stanley, Strategist
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Euro, EUR/USD Price Action Analysis:

  • The Euro had a brutal first few weeks of February, especially against the US Dollar.
  • EUR/USD set a fresh two-year-low just last week.
  • Since then, however, selling pressure has dried up and the pair has begun to retrace.

EUR/USD Breaks Out from Ascending Triangle Formation

In a very similar scenario as to what showed in the US Dollar in early-January, EUR/USD has jumped higher in a bullish breakout after the build of an ascending triangle formation. And, in both cases, the market was in a heavily beleaguered state after a prolonged sell-off brought multi-month and, in the instance of EUR/USD, multi-year lows into the mix.

I had looked at this setup on Tuesday of this week; with EUR/USD being an area of interest for bearish-USD strategies while USD/CAD remained of interest for bullish-USD scenarios. At this point, both markets have broken out; with USD/CAD stubbornly pushing up to fresh four-month-highs despite the fact that DXY continues to sell-off ahead of month-end. Also looked at in that article were two points of resistance to follow for that EUR/USD breakout to move towards next: The price of 1.0890 as a nearby spot and then 1.0925 as a secondary resistance level. Now – the pair is charging-higher towards a big area of long-term interest that now sits just ahead.

EUR/USD Two-Hour Price Chart

EURUSD EUR/USD Two Hour Price Chart

EUR/USD on Tradingview

EUR/USD Nearing Potential Resistance, Prior Support

The price of 1.1000 is and has been an important psychological hurdle in the pair for over the past few months. After showing resistance-turned-support in early-October, the zone running from 1.0987-1.1000 elicited multiple support inflections. Another support bounce from this area showed in late-January, just after the FOMC rate decision.

EUR/USD BEARISH
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Change in Longs Shorts OI
Daily 20% -6% 6%
Weekly 62% 8% 32%
Current Retail Sentiment in EUR/USD
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But when sellers went on the attack in early-February, support could hold no longer, and bears punched through that zone as if it didn’t exist on the way down to fresh two-year-lows. Price action even dipped into a key zone of support potential at a gap that remains from April 2017 trade. Perhaps ironically, that gap was created by a bit of cessation around the worries in European politics; in that instance, looking at France. But it was the re-incorporation of Italian political risk that later helped to propel the pair down to current levels, and that remains a risk on the horizon today.

At this point, the 1.1000 zone looms large on the chart for that next item of potential resistance. I’m not likely the only one seeing this zone, however, so the potential for shenanigans exists; such as a false break or a lower-high just before the zone comes into play. So this zone could be approached liberally as a line-in-the-sand as to when EUR/USD sellers may come back to the table. In the interest of broadening that zone, a Fibonacci retracement applied to the February major move offers a 50% marker right at 1.1008: This could allow for that potential resistance to span from 1.0989 up to 1.1008.

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This would be an area of interest to follow for resistance as month-end flows drive through tomorrow’s trade; looking for reversal/swing potential around the March open.

EUR/USD Daily Price Chart

EURUSD Euro to US Dollar

EUR/USD on Tradingview

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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

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