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EUR/USD Technical Analysis: Euro Breakdown in the Works?

EUR/USD Technical Analysis: Euro Breakdown in the Works?

2020-01-21 04:00:00
Ilya Spivak, Head Strategist, APAC
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EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro grinding through 4-month trend support, eyeing breakdown
  • Confirmation may set the stage for a drop toward the 1.07 figure
  • Near-term chart hints bounce may precede bearish progression

The Euro is inching closer toward a break downward against the US Dollar. The exchange rate is grinding through support in the 1.1069-1.1104 area, a price congestion area bolstered by upward-sloping support defining the upswing from the October 1 swing low.

Confirmation of a breach on a daily closing basis initially exposes the 1.0968-90 inflection zone, followed by the four-month low at 1.0879. A bounce form here sees minor resistance at 1.1149 but a true test of buyers’ mettle probably requires a challenge of the December 31 peak at 1.1239.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

The weekly chart offers a sense of what downtrend resumption might ultimately look like. Trading dynamics of the descent in play since mid-2018 point to an average downswing of 4.6 percent. Such a move would put the single currency just above the 1.07 figure, amounting to the lowest level since April 2017.

EUR/USD Technical Analysis: Euro Breakdown in the Works?

EUR/USD weekly chart created with TradingView

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Zooming in to the four-hour chart for a look at more immediate positioning warns against over-extrapolating bearish follow-through just yet. First and foremost, prices have yet to break support. Until that occurs, traders may judge building out short exposure as unattractive from a risk/reward perspective.

Furthermore, signs of positive RSI divergence have emerged. That points to ebbing downward momentum that might precede a bounce. If any such move manages to breach falling resistance in play since the calendar turned to 2020 – now at 1.1157 – immediate selling pressure will appear to have been neutralized.

EUR/USD Technical Analysis: Euro Breakdown in the Works?

EUR/USD 4-hour chart created with TradingView

EUR/USD TRADER SENTIMENT

EUR/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 23% -24% -10%
Weekly 19% -28% -15%
What does it mean for price action?
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EUR/USD TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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

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