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Euro Price Analysis: EUR/USD Rip Runs into Key Fibonacci Resistance

Euro Price Analysis: EUR/USD Rip Runs into Key Fibonacci Resistance

2020-03-04 13:34:00
James Stanley, Strategist
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Euro, EUR/USD Price Analysis

  • The Euro put in an aggressive rally over the last week-and-a-half.
  • What started off as a short squeeze has likely brought some bulls into the mix as USD has deteriorated; and EUR/USD has shot-higher in response.
  • The fundamental front on the Euro is not glaringly positive, leading to the deduction that the brute portion of this move was unwind related to the USD-trend reversal.

Euro Rips into Key Resistance Zone

The Euro was breaking down just a few weeks ago, and EUR/USD was pushing down to fresh two, almost three-year-lows as price action crossed below the 1.0800 figure. There was a potent cocktail of drivers, key of which was a weakened European economy against a bullish USD that was on its way to fresh three-year-highs. To be sure, there wasn’t really a strong fundamental push on either side of the coin: Even though US data was a touch stronger than European data, there remained expectations for the FOMC to cut while the ECB is likely close to as loose as they can go; at least without some other ‘extraordinary measures’ that we don’t yet know about.

EUR/USD price action has been downright vicious over the past month; sticking to a hardened sell-off through the first few weeks of January before running into gap support. It was two weeks ago in this piece that I alerted to a bullish breakout brewing around that support zone: Buyers were coming in at higher-lows while horizontal resistance held around a key Fibonacci level. That breakout cleared in short order, and prices perked up to a fresh monthly high.

But what started as a trickle soon turned into a stampede and price action jumped through the next target and ran up to the 1.1000 handle. That prior zone of well-heeled support could only pause the bullish move, however, as buyers posed yet another breakout all the way up to the 1.1200 handle. At that point, price action ran into a huge zone of resistance that, so far, has held the advance at bay.

EUR/USD Daily Price Chart

EURUSD Daily Price Chart

EUR/USD on Tradingview

Euro Entangled with Key Resistance Zone

There are a few Fibonacci levels of note within close proximity; creating an area of confluence on the charts that runs from 1.1187 up to 1.1212. The latter of those prices is of particular interest, as this level has been in-play on EUR/USD in a number of different ways over the past few years, and this is the 61.8% Fibonacci retracement of the ‘lifetime move’ in the pair. The level of 1.1187 is the 61.8% retracement of the 2017-2018 rally and collectively, this zone has stopped multiple trends on either side of the pair dead in its tracks.

EUR/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 7% 10% 8%
Weekly 45% -25% 6%
Current Retail Sentiment in EUR/USD
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The big question is whether this is happening again; as a bullish trend in EUR/USD quickly went overbought on its venture up to this zone; and sellers are now starting to come back into play to push the pair lower.

EUR/USD Four-Hour Price Chart

EURUSD EUR/USD Four Hour Price Chart

EUR/USD on Tradingview

EUR/USD: Not a Likely Safe-Haven

Some comments were made regarding this recent move in EUR/USD suggesting that the Euro was taking on a ‘safe haven’ status; as the currency jumped during a wide move of risk-off across global markets. This is not likely the case as the push was probably emanating from unwind as traders flowed out of the USD in anticipation of rate cuts. Those rate cuts happened, surprisingly, yesterday and since then EUR/USD has begun to fold off of this level of resistance.

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So, at this point, it would appear as though there’s a similar drive for the risk off trade and the topside of EUR/USD as more unwind may show in the pair. This takes place while the bearish side of EUR/USD appears aligned with the return of the risk-on trade.

So, for those that would like to look for continued topside in EUR/USD, near-term momentum would likely be the avenue to look towards as the pair still has a series of higher-highs and higher-lows that can be defended. The bigger question is whether buyers will be able to re-test and, in-turn, break that big zone of confluent resistance lurking above current price action.

EUR/USD Two-Hour Price Chart

EUR/USD Two Hour Price Chart

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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