EUR/USD Technical Analysis: Euro Drop May Be About to Resume
EUR/USD TECHNICAL ANALYSIS: BEARISH
- Euro finds support below 1.08 figure, attempts recovery vs US Dollar
- Near-term positioning suggests upswing may be running out of steam
- Retail trader sentiment studies warn against bearish over-exuberance
The Euro is attempting to recover against the US Dollar, as expected. Prices found support at 1.0783 – the outer layer of an inflection zone established in the first half of 2017 – and bounced. The region’s upper threshold at 1.0880 now marks immediate resistance, with a daily close above that likely to set the stage for a larger retracement to challenge the 1.0968-90 area anew.
Zooming in to the four-hour chart for a closer look at immediate positioning hints the upswing may have run its course however. The appearance of negative RSI divergence on a test of support-turned-resistance marked by September-October 2019 bottom in the 1.0878-84 area suggests upside momentum is draining. That may set the stage to re-engage the downtrend.
A daily close below 1.0777 – the February 20 swing bottom – would help confirm the case for downside follow-through. Sellers face the next major hurdle beyond that at 1.0671, a pivot level dating back to the December 2016 – April 2017 period. Such a decline would overshoot the estimated drop toward the 1.07 figure implied by downtrend dynamics since mid-2018.
EUR/USD TRADER SENTIMENT
Retail sentiment data shows 74.27% of traders are net-long, with the long-to-short ratio at 2.89 to 1. The number of traders net-long is 1.86% higher than yesterday and 6.96% lower from last week, while the number of traders net-short is 12.65% higher than yesterday and 4.62% higher from last week.
IG Client Sentiment(IGCS) is typically used as a contrarian indicator, and traders being net-long suggests EUR/USD may continue to fall.Yet positioning is less net-long than yesterday and compared with last week, which hints that EUR/USD may rebound.
EUR/USD TRADING RESOURCES
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--- 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.