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EUR/USD Technical Price Outlook: Dollar Breakout or Euro Fake-out?

EUR/USD Technical Price Outlook: Dollar Breakout or Euro Fake-out?

Michael Boutros, Strategist

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

  • Euro updated technical trade levels – Daily & Intraday Charts
  • EUR/USD plunges though support to fresh yearly lows- focus on weekly close around 1.0814/31
  • Resistance 1.0919, 1.1067 (key), 1.1109– Support 1.0726, 1.0637(key), 1.0592
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Euro plunged more than 1.3% against the US Dollar today with the post-ECB sell-off driving EUR/USD into fresh yearly lows. That said, we have yet to validate a break of support with an extended holiday break on the horizon- looking for evidence into the close of the week. 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

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

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

Technical Outlook: In last month’s Euro Price Outlook we highlighted that a, “breakout above the median-line today keeps the focus on the upper parallels (near ~1.1180s) and key resistance at 1.1215/31…” EUR/USD registered a high at 1.1184 into the close of March before reversing with an outside-day reversal marking the start of a 3.8% decline to fresh yearly lows.

The immediate focus is on this attempt to break below key support around the yearly low – 1.0814/81 is defined by the 78.6% Fibonacci retracement of the late-2016 advance and the 88.6% retracement of the 2020 advance. A break / weekly close below this threshold would be needed to keep the immediate short-bias viable. It’s worth noting that Euro is poised to mark an outside-day reversal lower into fresh lows – often times can be a warning for near-term exhaustion of the dominant trend.

Euro Price Chart – EUR/USD 120min

Euro Price Chart - EUR/USD 120min - Euro vs US Dollar Trade Outlook - EURUSD Technical Forecast

Notes: A closer look at Euro price action shows EUR/USD trading within the confines of a near-term descending pitchfork formation extending off the late-March highs. A break below the weekly opening-range on the heels of today’s ECB rate decision fueled a move lower with an embedded channel offering some guidance here. Initial support rests at the 2020 low-day close at 1.0726 backed by the 2020 low at 1.0637- both zones of interest for possible downside exhaustion IF reached. Weekly-open resistance steady at 1.0919 – with near-term bearish invalidation eyed at the objective April monthly-open at 1.01066.

Bottom line: Euro is threatening a much larger breakdown IF price is able to stabilize below 1.0814/31 in the days ahead- exhaustion risk here is high. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- rallies should be limited by the weekly open IF price is heading lower on this stretch. On the other hand, IF this ends up becoming a fake-out (weekly close back above) expect a more significant recovery towards the April open. Keep in mind we area heading into thinned holiday trade ahead of the extended Easter break- stay nimble here. 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

Euro Trader Sentiment - EUR/USD Price Chart - Euro vs US Dollar Retail Positioning - EURUSD Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long EUR/USD - the ratio stands at +2.51 (71.47% of traders are long) – typically bearish reading
  • Long positions are 5.80% lower than yesterday and 5.50% higher from last week
  • Short positions are 7.24% higher than yesterday and 7.39% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Positioning is less net-long than yesterday but more net-long 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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Euro / US Economic Calendar

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- 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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