EUR/USD Price Setup:
- EUR/USD falls to critical support
- EUR/USDPrice action has fallen through bottom of rising wedge
- MACD lingers below the zero line
EUR/USD has fallen to a key level of support after falling short of the 1.2400 psychological level late last week. With a range of high impact economic events on the horizon the big question is whether bears can continue to push, or whether Fibonacci support will be able to contain the lows.
Dailyfx, Economic Calendar
While the probability of additional fiscal stimulus for the US has been priced into the market, higher treasury yields have helped buoy US Dollar strength, pushing EUR/USD price action into a confluent zone of support that came into play several times throughout December 2020.
EUR/USD Technical Analysis
After recovering from March 2020 lows, the upward trend pertaining to EUR/USD prevailed, eager to test the 2018 high. However, following a test of the upper bound of the Bollinger Band combined with the formation of a tombstone doji, EUR/USD bears were able to push prices lower until reaching a critical zone of support at 1.2134.
EUR/USD Weekly Chart
Chart prepared by Tammy Da Costa, IG
For now, prices remain in a short-term range-bound state, with the Moving Average Convergence Divergence currently resting below the zero line, a potential indication that bearish momentum may prevail. Meanwhile the Relative Strength Index (RSI) is within range, but remains faithful to the lower bound, at least in the short-term.
EUR/USD 4 Hour Chart
Chart prepared by Tammy Da Costa, IG
Should bulls take charge once again, a break above the key psychological level of 1.2200 could result in bullish continuation with the potential for tests towards the January highs.
However, a break below current support could see bears testing the 50% Fibonacci retracement level of the historical move, at 1.2100.
EUR/USD Sentiment
At the time of writing, retail trader data shows 45.76% of traders are net-long with the ratio of traders short to long at 1.19 to 1. The number of traders net-long is 17.31% higher than yesterday and 28.19% higher from last week, while the number of traders net-short is 1.68% lower than yesterday and 9.83% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.
Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.
--- Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
