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

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

2018-05-12 13:41:00
Paul Robinson, Currency Strategist
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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.

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---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.

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