EUR/USD Technical Highlights:
- EUR/USD turns higher from significant support, but…
- Strength is viewed as likely to be short-lived
- At the moment risk/reward unfavorable for new positions, but could soon change
Last week, EUR/USD traded relatively in-line with our tempered expectations – the euro chopped around with little net effect for the week as the ECB-driven move from the Thursday before took time to digest. Overall, a second test of significant support held this past week, keeping sellers at bay for the time-being.
Will one side or the other win-out in the days ahead, or will it be another week-long bout of choppy price action? The thinking in this corner is that there will be a little more upside, but it may not be easy, so a continuation of last week’s wobbly price action will be unsurprising.
With a bit more strength, the euro will quickly find itself contending with the trend-line running lower from a swing-high in April passing over the high from the ECB-day. This could be enough to put a cap on a bounce and turn the euro back towards another test of support. Should we see a clean closing bar break of 11508, look for an acceleration in selling.
Tactically speaking, it’s a tough spot here with strong support too close for fresh shorts, but not postured well enough to confidently establish a long position. For now, there is reservation to make a move until we have more information. Generally, though, the bias is towards eventually seeing another leg down.
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EUR/USD Daily Chart (Support keeps it buoyed for now)
As per IG Client Sentiment, retail traders appear to be just as indecisive as the price action at the moment. We saw a big ramp in buying/short-covering into the June 14 swoon, but since then activity has settled out and net-net 57.1% of traders are currently long. As a contrarian indicator this is modestly bearish, but keep an eye on any significant swings in sentiment readings relative to price for indications as to which way the euro may want to head.
EUR/USD IG Client Sentiment
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX