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EUR/USD Technical Analysis: Euro Rally Hits a Wall at Range Top

EUR/USD Technical Analysis: Euro Rally Hits a Wall at Range Top

Ilya Spivak, Head Strategist, APAC

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro upswing stalls at familiar range top near the 1.10 figure
  • Near-term positioning hints a downswing may be in the cards
  • Trader sentiment studies warn positioning still favors upside

The Euro was rejected lower on a test of familiar range resistance in the 1.0992-1.1009 area, a barrier that has contained the upside for nearly two months. Extending downward from here puts the spotlight on the range floor in the 1.0768-78 zone. This threshold is reinforced by rising trend line support underpinning EUR/USD action since prices put in the year-to-date low in late March.

A retest of that bottom (1.0636) may follow if sellers manage to clear range support and confirm the breach on a daily closing basis. More broadly, such a break may suggest that the long-term downtrend started in early 2018 has resumed. Alternatively, upside resumption that cements a foothold above the range top is likely to put swing top resistance at 1.1147 into focus next.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

Zooming into the four-hour chart for a look at more immediate positioning seems to bolster the case for a downswing. Prices put in a dramatic-looking Bearish Engulfing candlestick pattern. Negative RSI divergence speaks to ebbing upside momentum and bolsters the case for a downside scenario. Range midline support at 1.0891 marks a potential sticking point along the way to range bottom.

Euro vs US Dollar price chart - 4 hour

EUR/USD 4-hour chart created with TradingView

EUR/USD TRADER SENTIMENT

Retail positioning data offers would-be sellers a word of caution however. It shows that 70.25% of traders are net-short EUR/USD, with the short-to-long ratio at 2.36 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, sothe skew in tradersexposure suggests the trend is biased upward.

In fact, the net-short tilt has widened recently, up 4.84 percent from yesterday and 91.46 percent compared with a week before. This seems to make for a strengthening bullish bias, although the disparity in positioning is approaching levels where extremes have tended to cluster in the past.

Euro vs US Dollar price, trader sentiment

See the full IGCS sentiment report here.

EUR/USD TRADING RESOURCES

--- Written by Ilya Spivak, Head APAC Strategist for DailyFX

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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