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Euro Forecast: EUR/USD Recovery Puts Monthly-Open Hurdle in Focus

Euro Forecast: EUR/USD Recovery Puts Monthly-Open Hurdle in Focus

Michael Boutros, Strategist

Euro Technical Price Outlook: EUR/USD Weekly Trade Levels

  • Euro updated technical trade levels & sentiment – Weekly Chart
  • EUR/USD breakdown rebounds off Fibonacci support- bear market recovery or reversal?
  • Risk for deeper setback while below the 1.22-handle – Key daily support at 1.1835
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Euro surged more than 1.3% off last week’s lows against the US Dollar after rebounding off Fibonacci support on an outside-day reversal on Friday. The immediate focus is on a reaction at key resistance just higher for guidance with the recovery vulnerable into the yearly high-close. These are the updated targets and invalidation levels that matter on the EUR/USD weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro technical setup and more.

Euro Price Chart – EUR/USD Weekly

Euro Price Chart - EUR/USD Weekly - Euro vs US Dollar Trade Outlook - Technical Forecast

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

Notes: In my last Euro Weekly Price Outlookwe noted that the EUR/USD, “breakout has extended into broader uptrend resistance and we’re looking for a reaction up here in the days ahead failure to mount 1.2337 on a weekly close basis would threaten a larger price correction within the confines of the broader uptrend.” That week marked the high in Euro with price dropping more than 2.9% before rebounding of the 23.6% retracement of the 2020 yearly advance at 1.1945 late-last week.

Monthly open resistance stands at 1.2128 with bearish invalidation now set to the 1.2197-1.2219- a region defined by the 61.8% Fibonacci retracement of the year-to-date range and the January high-week reversal close. A breach / close above this threshold would be needed to mark resumption of the broader EUR/USD uptrend. Initial support steady at the 1.20-handle backed by 1.1945 and the August high-week reversal close at 1.1835- a break / close below would suggest a more significant high was registered last month with such a scenario exposing the 38.2% retracement at 1.1695.

Bottom line: The Euro breakdown has rebounded off initial Fibonacci support and while further advances may be likely near-term, the threat for a larger setback remains while below the yearly high-day close. From a trading standpoint, on the lookout for topside exhaustion / swing high while below 1.2219 IF price is indeed heading lower with a break / close below 1.1835 needed to suggest a larger reversal is underway. Ultimately, a close above yearly open resistance at 1.2239 is needed to shift the focus back towards the multi-year highs in Euro. 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

Euro Trader Sentiment - EUR/USD Price Chart - Euro vs US Dollar Retail Positioning
  • A summary of IG Client Sentiment shows traders are net-short EUR/USD - the ratio stands at -1.39 (41.82% of traders are long) – weak bullish reading
  • Long positions are2.92% higher than yesterday and 8.30% lower from last week
  • Short positions are11.54% lower than yesterday and 12.05% higher 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. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

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Key Eurozone / US Data Releases

Key Eurozone / US Data Releases - EUR/USD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk.

Previous Weekly Technical Charts

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

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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