Euro Technical Price Outlook: EUR/USD Fades CPI Losses- Breakout Brewing

Euro Technical Price Outlook: EUR/USD Near-term Trade Levels

• Euro updated technical trade levels – Daily & Intraday Charts
• EUR/USD fades CPI losses – bulls eye breakout of multi-month downtrend
• Resistance 1.1482/99, 1.1540, 1.1569 - Support at 1.1383, 1.1343/60, 1.1259

Euro surged more than 3% off the January lows against the US Dollar with EUR/USD threatening a breakout today on the heels of a hotter than expected US inflation print today. January CPI recorded another 40-year high with headline inflation now running at 7.5%. The initial USD strength was quickly faded with Euro once again probing a key resistance confluence. These are the updated targets and invalidation levels that matter on the EUR/USD technical price charts heading into the close of the week. Review my latest Strategy Webinar for an in-depth breakdown of this Euro technical setup and more.

Euro Price Chart – EUR/USD Daily

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

Technical Outlook: In my last Euro Price Outlook we noted that EUR/USD breakdown had, “already extended towards downslope support and may be a bit stretched here,” as the sell-off approached the 1.11-handle. Euro never made it there with as the decline registering a low at 1.1121 before reversing sharply higher into the close of January. The subsequent rally is now probing key downtrend resistance around the 2019 yearly open at 1.1445 with the yearly opening-range highs higher. We’re looking for possible inflection up here with a breach / close above the 2019 high-day close at 1.15 needed to suggest a larger trend reversal is underway.

Euro Price Chart – EUR/USD 240min

Notes: A closer look at Euro price action shows EUR/USD trading within the confines of an ascending pitchfork formation extending off the November / January lows. Today’s US CPI releases charged a defense of the yearly open at 1.1383 before quickly retracing with the focus now on a breakout of the objective weekly opening-range for guidance. Key resistance stands at the January highs / 2019 high-day close at 1.1482/99 and is backed by the upper parallel (currently ~1.1540s)- look for a larger reaction there IF reached. In the event of a breakout, look for subsequent resistance objectives at the 2019 highs at 1.1569 and the 38.2% Fibonacci retracement of the 2021 decline at 1.1590. Initial support steady at 1.1383 backed closely by 1.1344/60- losses should not surpass this threshold IF price is indeed heading higher.

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Bottom line: A V-shaped recovery takes EUR/USD back into confluent downtrend resistance- looking for possible price inflection here with the focus higher while above the median-line. From a trading standpoint, be on the lookout for an exhaustion low ahead of 1.1344/60 with a topside breach / close above the 1.15-handle needed to keep the immediate long-bias viable. Review my latest Euro Weekly Price Outlook for a closer look at the longer-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 -1.51 (39.86% of traders are long) – typically bullish reading
• Long positions are 1.50% higher than yesterday and 14.97% lower from last week
• Short positions are1.47% higher than yesterday and 29.00% 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. Traders are less net-short than yesterday but more net-short from last week. The combination of current positioning and recent changes gives us a further mixed EUR/USD trading bias from a sentiment standpoint.

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex