EURUSD Weekly Technical Outlook: Euro May Bounce, but Buyer Beware
EURUSD Technical Highlights:
- Euro may bounce a bit/consolidate before lower
- Levels to watch on top and bottom-side
- DXY breakout is sustainable above 9771
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Euro may bounce a bit/consolidate before lower
Last week, the Euro took a spill to lows not seen in almost two years, but found a few buyers near a couple of levels of support which might keep a bid in it temporarily. A trend-line from 2015 and a minor swing low from 2017 were touched to end the week.
EURUSD may bounce around a bit, digesting its most recent set of losses, but as long as it doesn’t start immediately showing real power to the upside then further losses are anticipated. Trading through the March and April lows should prove problematic. If the Euro does, then look for a trend-line from last month to keep an advance in check.
Looking lower, there is some support to consider, but given that the angle of these lines runs with the trend there looks to be a better than average chance they don’t provide a significant bid. The November 2017 under-side trend-line is the biggest concern, followed by a parallel to the March trend-line.
Low volatility has kept the Euro moving lower in gradual fashion. If in the coming sessions a drop below 11000 can unfold, putting the Euro clearly below noted support, this could change with an uptick in volatility.
In the event of a drop below 11000, a gap-fill from the French election down at 10724 will be targeted. It’s been on my mind for a while, and I do believe it will get filled at some point, but of course the path to doing so is still uncertain. Next week may help provide more conviction that it could come sooner rather than later.
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EURUSD Daily Chart (Levels, lines to watch)
The DXY broke out strongly last week above the 9771 level, triggering a mostly developed ascending wedge pattern. The Euro is ~57% of the weighting of this index; so goes the Euro goes the DXY for the most part. As long as 9771 isn’t breached on a daily closing basis, then I will give the breakout the benefit of the doubt. A retest of the breakout may occur here shortly and offer a solid risk/reward proposition for Dollar bullish bets.
US Dollar Index (DXY) Daily Chart (Bullish above point of breakout)
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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.