Euro Technical Outlook: EUR/USD Bounce Brings Fade Potential

Euro Technical Price Outlook: EUR/USD Weekly Trade Levels

• Euro updated technical trade levels & sentiment – Weekly Chart
• EUR/USD recovery approaches first major test of resistance
• Key support at 1.1616 – Critical resistance at 1.1823/35

Euro is attempting a second weekly advance against the US Dollar after rebounding off confluence support into the close of September. The rally is vulnerable however as EUR/USD approaches the first test of resistance and we’re on the lookout for possible exhaustion on a stretch higher. These are the updated targets and invalidation levels that matter on the EUR/USD weekly price chart. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Technical Strategist; EUR/USD on Tradingview

Notes: In last month’s Euro Weekly Price Outlook we noted that the EUR/USD rally was vulnerable as the, “weekly momentum profile highlights the risk for topside exhaustion here while below 1.2005 with a pending RSI support trigger in view.” That high held with a break of the September opening-range lows fueling a decline of more than 3.3% before rebounding off confluence support at the 2016 swing high at 1.1616.

A recovery of more than 1.5% off the lows is now eyeing key resistance at 1.1823/35- a region defined by the 61.8% Fibonacci retracement of the 2018 decline and the yearly high-week reversal close. The recovery may be vulnerable while below this threshold. A break / close below 1.1616 would expose more significant support at the 2019 open / 38.2% retracement at 1.1445/86-an area of interest for possible downside exhaustion IF reached. A topside breach / close above the 1.1835 level is needed to mark resumption towards 1.2005 again.

Bottom line: The recent Euro recovery is approaching the first major resistance zone and leaves the rally vulnerable here. From at trading standpoint, be on the lookout for topside exhaustion / swing high ahead of 1.1823/35 with a close lower needed to suggest a larger correction is underway. Ultimately, a larger correction may offer more favorable entries closer to uptrend support. Review my latest Euro Price Outlook for a closer look at the near-term EUR/USD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Euro Trader Sentiment – EUR/USD Price Chart

• A summary of IG Client Sentiment shows traders are net-short EUR/USD - the ratio stands at -1.66 (37.60% of traders are long) – bullish reading
• Long positions are3.19% higher than yesterday and 0.63% higher from last week
• Short positions are11.60% lower than yesterday and 0.04% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

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Key Euro / US Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Previous Weekly Technical Charts

• Australian Dollar (AUD/USD)
• Canadian Dollar (USD/CAD)
• British Pound (GBP/USD)
• Gold (XAU/USD)
• Crude Oil (WTI)
• US Dollar (DXY)

--- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex