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EUR/USD Weekly Technical Forecast: More Bounce Before More Selling?

EUR/USD Weekly Technical Forecast: More Bounce Before More Selling?

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EUR/USD Technical Highlights:

  • EUR/USD finds buyers after straight line move lower
  • Bounce at risk of failing in the week ahead

For the intermediate-term fundamental and technical outlook on EUR/USD, check out the DailyFX Quarterly Forecast.

Last week’s net result was relatively even for EUR/USD, even posting a small reversal candle on the weekly time-frame, but nothing super convincing. Nevertheless, the euro could continue to recovery after the big slide its recently experienced.

However, the bounce, given the break of the April trend-line, and more importantly the 2017 high, appears at risk of stalling sooner rather than later and leading to another leg lower. Just ahead is the 200-day MA, but without any price levels in confluence we’ll have to wait and see how a touch of the MA will play out.

A rally up to the broken 2017 high and turn down would hold more appeal for refreshing short positions, as not only is this old support considered a new level of resistance, but the move off of last week’s low will have been sufficient enough to work off oversold conditions.

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EUR/USD Daily Chart (Bounce, then roll over?)

EUR/USD daily price chart, bounce then roll over?

Retail traders have demonstrated interesting behavior in EUR/USD as seen via IGCS Client Sentiment. On such a large move lower, one would have expected traders to take the other side of the decline more aggressively, but at only 1.25 traders long for every 1 short, we aren’t seeing the same kind of shift you would expect. For example, we saw the ratio in GBP/USD swell to 2.5:1 during its recent slide.

Following a bounce in the euro, keep an eye whether this behavior changes on another move lower. If we see an aggressive adding of long exposure in sudden-fashion, from a crowd contrarian standpoint, it could add weight to the notion we will see another leg lower to support in the low-11700s down to 11554.

Helpful Resources for Forex Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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