In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Euro tested a critical zone against the US Dollar with exchange rate reversing from yearly open resistance this week. These are the updated targets and invalidation levels that matter on the EUR/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
EUR/USD Weekly Price Chart
Notes: In last month’s EUR/USD Weekly Technical Outlook we noted that price was challenging key support at the 1.13 handle with a weekly close below, “needed to keep the immediate short-bias viable targeting 1.1223 and the 61.8% retracement of the 2017 advance at 1.1187.” Euro registered a low at 1.1176 on March 7th (ECB day) before rebounding sharply with the advance stalling at yearly open resistance at 1.1445 on the back of yesterday’s FOMC interest rate decision. Note that a pair of trendlines extending off last year’s March & September highs also converges on this region and further highlights the technical significant of this resistance zone.
A breach / weekly close above is needed to validate a larger reversal in price with such a scenario targeting critical resistance at 1.1571-1.1603 – a region defined by the 61.8% retracement of the September decline, the 52-week moving average and the September high outside-weekly reversal close- look for a bigger reaction there IF reached. Weekly support now rests with the low-week close at 1.1232 with 1.1187still critical.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: The Euro rally is now testing yearly open / slope resistance and leaves the immediate recovery vulnerable while below 1.1445. From a trading standpoint, we’re looking for signs of support while above 1.1232 IF price has indeed turned a corner. That said, a break below this week’s lows would shift the focus back towards longer-term pitchfork support, currently near 1.11. I’ll publish an updated EUR/USD Technical Outlook once we get further clarity in near-term price action.
Even the most seasoned traders need a reminder every now and then- Avoid these Mistakes in your trading
EUR/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short EUR/USD – the ratio stands at -1.28 (43.8% of traders are long) – weak bullish reading
- Long positions are 2.0% lower than yesterday and 11.7% lower from last week
- Short positions are 20.0% lower than yesterday and 8.2% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Euro prices may continue to rise. Yet traders are less net-short than yesterday but more net-short from last week andthe combination of current positioning and recent changes gives us a further mixed EUR/USD trading bias from a sentiment standpoint.
See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant Euro / US Economic Data Releases
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex