EUR/USD Technical Highlights:
- Euro has support via November trend-line
- May get a lift off t-line, but…
- Bear-flag building within 1-yr downtrend
Check out the recently released Euro Q1 Forecast to see our analysts’ intermediate-term fundamental and technical outlook.
Euro has support, but at risk of bear-flag breakdown
Euro weakness has it backing down amidst the chop again that’s mired its outlook since late October. With a little more weakness support will come into play via a trend-line from the November low. The trend-line makes up the lower parallel of a developing bear-flag.
Within the context of the one-year downtrend a breakdown below the lower threshold of the pattern should once again have EUR/USD firmly rolling downhill. For full confirmation, it may prove prudent to first wait for a break below the Jan 3 low at 11306. Support is support until it’s not.
It would be unsurprising given the current low-volatility environment to see a bounce develop as price swings in both directions have been short-lived. There is still plenty of risk that the bear-flag takes a while longer to fully mature. With that in mind, the tactical approach for the next week consists of more of the same cautiousness.
Looking for a bounce off the bottom-side of the bear-flag may prove fruitful for a quick flip if momentum turns up on the sub-daily time-frames (i.e. 4-hr), while a rally to the top-end of the pattern could present a decent risk/reward opportunity to establish a short.
If the 11306 level is broken, then leaning towards bearish momentum and/or pullback strategies may become an approach worth considering.
Traders are generally long EUR/USD, see the IG Client Sentiment page to find out how this could signal the next price move.
EUR/USD Daily Chart (T-line support, Bear-flag forming)
---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at@PaulRobinsonFX