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EUR/USD Technical Analysis: Euro Rebound Losing Steam?

EUR/USD Technical Analysis: Euro Rebound Losing Steam?

Ilya Spivak, Head Strategist, APAC

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro retraces, testing back above October support-turned-resistance
  • Retail trader sentiment studies suggesting scope for further recovery
  • Rising Wedge setup, RSI divergence warn upside momentum fading

The Euro has rebounded against the US Dollar after landing at a three-year low, as expected. The four-hour chart now shows EUR/USD has reclaimed a tentative foothold above support-turned-resistance marked by the October 2019 swing bottom (confirmation on a daily closing basis is absent for now).

If the move continues to find follow-through prices may move to revisit another recently broken multi-month support range in the 1.0989-94 area. This is reinforced by falling-trend line resistance guiding downward progress since the beginning of the year.

That the recovery is tracing out a typically-bearish Rising Wedge pattern coupled with negative RSI divergence warns that scope for gains might be limited and downtrend resumption not far behind. Confirming as much would need a break of the pattern’s lower boundary, now at 1.0855.

Euro vs US Dollar price chart - daily

EUR/USD 4-hour chart created with TradingView

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EUR/USD TRADER SENTIMENT

Chart of Euro vs US Dollar exchange rate, trader sentiment

Retail sentiment data shows 66.16% of traders are net-long, with the long-to-short ratio at 1.95 to 1. The number of traders net-long is 13.64% lower than yesterday and 22.9% lower from last week, while the number of traders net-short is 8.39% higher than yesterday and 4.11% 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 continue to rebound.

See the full IGCS sentiment report here.

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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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