Euro Technical Forecast: EUR/USD Signs of Exhaustion into August Open

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 1.0086, 1.0000/24 (key), 9902; resistance 1.0316/40, 1.0541, 1.0637 (critical)

Euro is on defense into the August open with EUR/USD attempting to snap a two-week winning streak. A rebound off downtrend support last month is in focus and while further upside potential remains, we’re on the lookout for possible topside exhaustion in the weeks ahead. 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: In last month’s Euro Weekly Price Forecast noted that the EUR/USD had, “rebounded off confluent downtrend support- the threat remains for some recovery within the broader decline.” Price has rallied more than 3.4% off the lows with the advance stalling into the start of the month- the threat is for possible topside exhaustion on this recovery within the broader multi-year downtrend.

Initial weekly resistance eyed at the 23.6% retracement of the 2022 range / 2017 swing low at 1.0316/40 backed by the 38.2% Fibonacci retracement at 1.0541- both levels of interest for possible topside exhaustion / price inflection IF reached. Ultimately a breach / close above the 2020 low at 1.0637 would be needed to suggest a larger reversal is underway (bearish invalidation). Initial weekly support rests with the low-week close at 1.0086 backed by 1.0000/24- a break / weekly close below this threshold is needed to mark resumption of the broader downtrend with such a scenario exposing a critical trendline confluence around the 78.6% retracement of the 2000 rally at 9900- look for a larger reaction in price there IF reached.

Bottom line: The Euro recovery off downtrend support remains in focus with the threat of a larger correction early in the month- we’re on the lookout for a medium-term high. From a trading standpoint, look to reduce long-exposure / raise protective stops on a push towards the downtrend resistance – losses (weekly closes) should be limited to 1.0086 on pullbacks IF price is indeed heading higher on this stretch. Ultimately, we’re looking for resumption of the broader downtrend in the weeks ahead. A 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 +1.60 (61.55% of traders are long) – typically a bearish reading
• Long positions are10.53% higher than yesterday and 4.51% lower from last week
• Short positions are7.50% lower than yesterday and 2.06% 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. 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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• Silver (XAG/USD)
• Crude Oil (WTI)
• Australian Dollar (AUD/USD)
• British Pound (GBP/USD)
• US Dollar Index (DXY)
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--- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex