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EUR/USD Technical Highlights:

  • Broader trend is down, but…
  • Short-term price pattern could be bullish
  • Outlook stuck in limbo, should sort itself out soon

For the intermediate-term fundamental and technical view, check out the DailyFX Q4 Euro Forecast.

EUR/USD broader downtrend versus short-term price pattern

Overall, since topping early in the year, the trend in the Euro has clearly been down, and while this looks set to continue, there will be, as we’ve seen on several occasions, countertrend rallies. It’s only in the developmental stage so far, but an inverse ‘head-and-shoulders’ could be in the works with a little more time and continue the bounce off the Nov 12 low.

The right shoulder will need to develop in the days ahead, followed by a push higher beyond the neckline and recent price resistance in the vicinity of 11450/500. While this could indeed be the course of events to follow, an extension out of the pattern, though, could be truncated by trend-line resistance from April and several swing lows from May to September.

A rally to that point could offer another good risk/reward spot for traders to look for a key swing-high to develop, potentially like the one which formed in September. With the broader bearish outlook still intact, bullish short-term potential and resistance ahead doesn’t, in my opinion, make the long-side all that appealing and acts more as a sign of caution on new shorts at the moment.

The aforementioned is assuming we have a bullish pattern to even worry about. If the Euro keeps trading lower the 11300 level will become significant again as a drop below will quickly diminish the probability we see a right shoulder fully form and sharply increase odds that another leg lower is well underway and a move below the monthly low and 1-year underside trend-line could be the next step.

Traders are generally flat EUR/USD, see the IG Client Sentiment page to find out how changes in positioning can help signal the next direction in price.

EUR/USD Daily Chart (More retracement or new leg lower already underway?)

EUR/USD daily chart, more retracement or new leg lower already underway?

EUR/USD 4-hr Chart (Inverse H&S potential)

EUR/USD 4-hr chart, inverse H&S potential

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