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EUR/USD Short-term Technical Outlook: Euro Recovery Stalls into Fed

EUR/USD Short-term Technical Outlook: Euro Recovery Stalls into Fed

Michael Boutros, Strategist

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

  • Euro updated technical trade levels – Daily & Intraday Charts
  • EUR/USD recovery off downtrend support in focus- Fed Rate Decision, US GDP, Inflation on tap
  • Support 1.0076, 1.0000 (key), 9902– Resistance 1.0271, 1.0352/85, 1.0468 (critical)
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Euro is off more than 0.7% against the US Dollar since the start of the week with EUR/USD ranging ahead of today’s Federal Reserve interest rate decision. While a rally off downtrend support threatens a larger bear-market recovery, major event risk into the close of the week / month could cut short this rebound- the battle lines are drawn. These are the updated targets and invalidation levels that matter on the EUR/USD technical price charts heading into FOMC. 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 Short-term Trade Outlook - EURUSD Technical Forecast

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

Technical Outlook: In my last Euro Short-term Price Outlook we noted that the EUR/USD hadbroken, “to fresh yearly lows keeps the broader outlook weighted to the downside in Euro – that said, we’re looking for possible price inflection just lower. . . rallies should be capped by 1.0385 IF price is heading lower on this stretch with a break / close below this slope needed to fuel a test of parity at the lower parallels.” Price briefly registered an intraday low 9952 one week later before rebounding sharply with a three-day rally recovering more than 3.2% off the lows. Has a short-term low been registered or is this just a bear market recovery? The Federal Reserve is on deck and we’re looking for some price clarity in the days ahead.

Euro Price Chart – EUR/USD 240min

Euro Price Chart - EUR/USD 240min - Euro vs US Dollar Shor-term Trade Outlook - EURUSD Technical Forecast

Notes: A closer look at Euro price action shows EUR/USD continuing to trade within the confines of a descending pitchfork formation extending off the yearly high. A recovery off the lower parallel on July 14th takes price back into the median-line and the focus is on a breakout of the weekly opening-range for guidance. Initial support rests with the 61.8% Fibonacci retracement of the recent advance at 1.0076 backed by parity (1.0000) – a break / close below this threshold is needed to mark resumption of the broader downtrend towards subsequent support objectives at 9902 and the 2001 high at 9595.

Initial resistance eyed at the 38.2% retracement of decline off the May highs at 1.0271 backed by the 2016 low / low-day close at 1.0352/85. Ultimately a breach / close above the 1.0468 would be needed to suggest a more significant low was registered this month / a larger reversal is underway.

Bottom line: Euro has rebounded off downtrend support with the recovery now straddling the median-line. From a trading standpoint, the threat remains for a larger rebound within the broader downtrend towards slope resistance while above parity. Be on the lookout for topside exhaustion ahead of 1.0385 IF the larger downtrend is to remain viable with a break lower from here likely to fuel another accelerated sell-off. Stay nimble heading into the Fed rate decision later today with US GDP and key inflation data (PCE) still on tap into the close of the week / month. A good time to reduce position size and adjust protective stops - buckle-up! 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 - EURUSD Retail Positioning - Euro Short-term Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long EUR/USD - the ratio stands at +1.64 (62.15% of traders are long) – typically bearish reading
  • Long positions are7.42% higher than yesterday and 5.96% higher from last week
  • Short positions are 5.26% higher than yesterday and 11.47% 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.

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Euro / US Economic Calendar

Eurozone / US Economic Calendar - EUR/USD Weekly Event Risk - Euro Key Data Releases

Economic Calendar - latest economic developments and upcoming event risk

Active Technical Setups

- 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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