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EUR/USD Outlook - Pointing Lower as US Dollar Strength Remains in Control

EUR/USD Outlook - Pointing Lower as US Dollar Strength Remains in Control

Nick Cawley, Strategist

EUR/USD Price, Chart, and Analysis

  • US dollar looking to consolidate recent gains.
  • EUR/USD prior support starting to turn into resistance.

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The latest FOMC minutes gave the greenback the necessary momentum to break higher with the DXY printing a fresh nine-month high yesterday, as markets continue to price in a slow down in the US bond-buying program. Over the next month, three important dates to note, all of which can move the dial further. Next week the Jackson Hole Symposium (August 26-28) will give Fed chair Powell the platform to give his thoughts on the strength of the US economy and if the conditions are being met to rein in the $120 billion a month QE program. On Friday, September 3, the August jobs figures (NFP) will be announced, before the September 21-22 FOMC meeting which includes the latest Summary of Economic Projections. It is becoming ever more likely that the latter event will see the Fed finally announce the date for the tapering program to begin.

The US dollar continues to price in the first stage of US monetary tightening and unless there are some negative economic releases or a continued acceleration in the number of US covid cases, the greenback is very unlikely to slip meaningfully lower.

US Dollar Index (DXY) Daily Price Chart August 20, 2021

The path of least resistance for EUR/USD remains pointed lower after the pair broke below noted resistance at 1.1700/04 and the 38.2% Fibonacci retracement level at 1.1694. The accelerated sell-off this week from 1.1800 has taken the pair below the 20-day simple moving average, the last of the three smas on the chart. There is very little in the way of technical support showing on the chart until the November 4, 2020 low at 1.16025 and this figure is likely to be tested, all things being equal, during the US timeframe highlighted earlier.

Euro (EUR/USD) Daily Price Chart August 20, 2021

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Retail trader data show 61.51% of traders are net-long with the ratio of traders long to short at 1.60 to 1. The number of traders net-long is 0.26% lower than yesterday and 15.31% lower from last week, while the number of traders net-short is 11.42% higher than yesterday and 5.64% higher 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 and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

EUR/USD Bullish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% 2% -2%
Weekly -27% 52% -10%
What does it mean for price action?
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What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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