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Euro Technical Outlook: EUR/USD Breakout Marks Week Six- Rally at Risk

Euro Technical Outlook: EUR/USD Breakout Marks Week Six- Rally at Risk

2020-07-31 22:00:00
Michael Boutros, Strategist
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Euro Technical Price Outlook: EUR/USD Weekly Trade Levels

  • Euro updated technical trade levels & sentiment – Weekly Chart
  • EUR/USD marks 6th weekly advance into fresh yearly highs
  • Constructive while above 1.1445- Immediate focus is on key resistance at 1.1815/23

Euro surged more than 1.5% against the US Dollar this week with EUR/USD marking a sixth consecutive weekly advance into fresh yearly highs. The rally takes price into a critical resistance confluence and while the broader outlook remains constructive, the immediate advance may be vulnerable heading into the start of August trade. These are the updated targets and invalidation levels that matter on the EUR/USD weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro trade setup and more.

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Euro Price Chart – EUR/USD Weekly

EURUSD Price Chart

Chart Prepared by Michael Boutros, Technical Strategist; EUR/USD on Tradingview

Notes:In last month’s Euro Weekly Price Outlook we noted to “focus on the 2019 objective yearly open at 1.1445- look for a reaction there with a close above needed to mark a larger reversal in trend towards 1.1597.” A breakout in the following weeks fueled a breach through the yearly opening-range highs with the rally now testing a critical resistance confluence at 1.1815/23- a region defined by the 61.8% Fibonacci retracement of the 2018 decline and the September 2018 swing highs. Note that the 2008 trendline converges on this zone and although Euro has already marked intra-week highs above, the focus remains on a weekly close here as we head into August trade.

Initial weekly support rests back at the 50% retracement / pitchfork support around ~1.1596 with broader bullish invalidation now raised 1.1445. A close above this key confluence zone would keep the focus on subsequent topside resistance objectives at the 2018 yearly open at 1.2005 and the 78.6% retracement at 1.2145.

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Bottom line: Euro has rallied nearly 12% off the yearly lows to fresh 2020 highs in just four months with the advance now testing a critical resistance confluence- watch the weekly close with respect to 1.1815/23. From a trading standpoint, a good zone to reduce long-exposure / raise protective stop – look for downside exhaustion ahead of 1.16 IF price is indeed heading higher with a close above the 2008 trendline needed to mark resumption of the March rally. Review my latest Euro Price Outlook for a closer look at the near-term EUR/USD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Euro Trader Sentiment – EUR/USD Price Chart

EURUSD
  • A summary of IG Client Sentiment shows traders are net-short EUR/USD - the ratio stands at -1.94 (33.97% of traders are long) – bullish reading
  • Long positions are4.91% lower than yesterday and 0.36% higher from last week
  • Short positions are7.19% lower than yesterday and 8.29% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.
EUR/USD MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% -2% -3%
Weekly 41% -34% -12%
Learn how shifts in Euro retail positioning impact trend
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--- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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