EUR/USD Technical Highlights:
- EUR/USD above September high, highest it’s been since spring 2018
- A hold above 12000 will be important if the trend is to continue
- Looking towards potential targets, the 12500-area could be next
EUR/USD breakout needs to hold above 12000
Yesterday, EUR/USD exploded above the September high, and in the process it snapped the multi-month range and put the euro at its best levels since the spring of 2018. At first glance it is a technically sound breakout given the power associated with it.
It will be important that price stays above 12000 if we are to see the break hold and not turn into a false breakout. A small dip before another upside push may be in order, but as long as it isn’t overtly bearish pressure then we will continue to give the upside the benefit of the doubt.
In the event the breakout holds, the next major level on the charts isn’t until the 2018 high at 12500. This could mean we see a rather sizable end-of-year rally in the works. Looking at the size of the range since September and comparing to the breakout over the summer above the March high, a 500 pip move is doable in a relatively short period of time.
A breakdown below 12000 with pressure will be cause for concern from the long-side, and at the least warrant a move towards neutral. We would want to see an immediate bullish response on any dip back inside the range, or else EUR/USD would run the risk of seeing it trade lower back towards the bottom of the range.
One potentially bearish factor some market participants are making note of is the extreme positioning in the futures market. Positioning by large speculators (hedge funds, CTAs, etc.) shows a market that is quite long. The extremes seen a couple of months back were near the same levels seen back at the top in 2018, but the size of the position has come off a bit since. Overall, positioning is a potential sign of a saturated market, but not necessarily indicative of one ready to reverse (as we are seeing). We may continue to see more upside before a heavily long futures market turns into fuel for selling.
EUR/USD Monthly Chart (2018 high next?)
EUR/USD Daily Chart (see if breakout can hold)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
