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EUR/USD Technical Analysis: Euro Biased Lower After Bounce

EUR/USD Technical Analysis: Euro Biased Lower After Bounce

2020-02-03 06:00:00
Ilya Spivak, Sr. Currency Strategist
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EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro jumps to gain most in a month vs. US Dollar amid risk aversion
  • 2020 resistance, former rising counter-trend support hold up to retest
  • Trend bias still seems to favor sellers, drop toward 1.07 may be due

The Euro short sharply higher against the US Dollar, scoring the largest one-day rise in a month. Most of the move seems to have been driven by USD selling amid swelling Fed rate cut speculation amid worries about the negative impact on economic growth of the Wuhan coronavirus outbreak.

Prices are now positioned to challenge the bounds of the downtrend in play since the beginning of the year. That is reinforced by the underside of support-turned-resistance at the floor of the rise from October’s lows. The dominant trend bias seems bearish absent a daily close above these barriers.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

In the context of near-term positioning, such a reversal might look like a return above 1.1150. The next upside hurdle of interest thereafter is the December high at 1.1239. Alternatively, bearish resumption faces initial support in the 1.0968-90 zone. A close below that is likely to target the October 1 bottom at 1.0879.

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Zooming out to the weekly chart hints sellers retail the upper hand. EUR/USD remains within the confines of a well-defined 8-month downtrend. A break of rising countertrend support speaks to bearish resumption. A subsequent rise has tellingly kept the outlines of that setup intact on retest.

EUR/USD Technical Analysis: Euro Biased Lower After Bounce

EUR/USD weekly chart created with TradingView

Averaging the depth of prior downswings within the current trend produces a baseline 4.6 percent decline. Measuring such a move down from the latest swing top above the 1.12 figure implies a drop to three-year lows just above the 1.074 figure.

EUR/USD TRADER SENTIMENT

EUR/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -14% -5% -12%
Weekly -5% 20% 0%
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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