Euro Forecast: EUR/USD Bounce Cut Short on ECB – Technical Levels

2022-07-21 15:00:00

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Euro Technical Price Outlook: EUR/USD Weekly Trade Levels
Euro Price Chart – EUR/USD Weekly
Euro Trader Sentiment – EUR/USD Price Chart
Eurozone / US Economic Calendar
Previous Weekly Technical Charts

Euro Technical Price Outlook: EUR/USD Weekly Trade Levels

Euro updated technical trade levels & sentiment – Weekly Chart
EUR/USD recovery off downtrends support in focus- threat for topside exhaustion ahead
Weekly support 1.0000/24 (key), 9902; resistance 1.0340, 1.0483, 1.0637 (critical)

Euro is poised to snap a three-week losing streak with EUR/USD rebounding off technical downtrend support after plunging more than 5% in July. The recovery is in focus and we’re on the lookout for possible topside exhaustion on the heels of today’s European Central Bank (ECB) interest rate decision with the broader risk still weighted to the downside while below the monthly open at 1.0483. 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

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

Notes: Into the open of July, our Euro Weekly Price Forecast noted that the EUR/USD had, “plunged into support near the yearly lows into the start of July / Q3. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – rallies should be capped by 1.0637 IF price is heading lower on this stretch with a break / close below 1.0340 needed to fuel the next leg lower in price.” Euro plunged through support two-days later with a decline of nearly 4.5% probing confluent downtrend support last week at parity / 1999 low-week close at 1.0000/24 (intraweek low registered at 9952). Is a near-term low in place?

Initial weekly resistance now eyed back at the 2017 low at 1.0340 backed by the monthly open at 1.0483 and the 2021 channel / 2020 swing low at 1.0637. Ultimately, a breach / weekly close above the 38.2% Fibonacci retracement of the yearly 2021 decline at 1.0867 (bearish invalidation). Weekly support steady at parity with a break / close below the 78.6% retracement of the 2000 rally at 9902 needed to mark resumption of the broader downtrend. Note that a break here could fuel another accelerated bout of Euro losses with such a scenario exposing subsequent objectives at the 2001 high at near 9595.

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Bottom line: Euro has rebounded off confluent downtrend support- the threat remains for some recovery within the broader decline. From at trading standpoint, be on the lookout for topside exhaustion on this recovery – rallies should be capped by 1.0483 IF price is heading still heading lower on this stretch with a close below 99 needed to fuel the next leg in price. Review my latest Euro Short-term 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-long EUR/USD - the ratio stands at +1.76 (63.72% of traders are long) – typically a bearish reading
Long positions are0.49% higher than yesterday and 22.41% lower from last week
Short positions are1.18% lower than yesterday and 26.94% higher 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. Traders are more net-long than yesterday but less 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.