EUR/USD Weekly Technical Forecast: Support Test Next for the Euro
EUR/USD Technical Highlights:
- EUR/USD on approach of key support test in vicinity of 11725/11670
- How the euro reacts upon a test will be telling for the extended outlook
Last week, we were looking for the euro to find a bit more of a bounce, but said risk was still in favor of lower prices. Follow-through lasted a whole half-a-day Monday before carving out a bearish key reversal bar shy of the 200-day MA and trading off for the remainder of the week.
Looking ahead to next week, there is a good amount of support in the vicinity of 11725/670 which could put a larger rebound in place, or at least pause downward momentum for more than a couple of days. Since breaking down last month, wow price reacts to the first big test of sizable support will be critical to the outlook moving forward.
So, while this next week may not hold a big move, price action could be telling moving beyond the next few days. A strong reversal off support will shine light on the notion we could have a tradable low at hand, while a failure to garner any buying interest will suggest another leg lower will be in store.
Tactically, it’s a tough spot given the extended trend and support close by (fresh shorts hold poor risk/reward), while longs will be of the counter-trend variety for now and require some type of sharp reaction off support to pique buying interest.
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EUR/USD Daily Chart (Support coming up)
Retail traders have been relatively flat recently despite the big move in EUR/USD; keep an eye on IG Client Sentiment for any changes which might provide further evidence of a tradable low (sharply increasing short exposure) or continued trade lower (sharply increasing long exposure).
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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.