Euro is down more than 1.1% from the Pre-FOMC high against the US Dollar after turning precisely off yearly open resistance last week. While the risk remains for further losses near-term, the focus is on uptrend support just lower. These are the updated targets and invalidation levels that matter on the EUR/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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EUR/USD Daily Price Chart
Technical Outlook: In my latest EUR/USD Weekly Technical Outlook, we noted that price was testing critical, “yearly open resistance at 1.1445 on the back of the 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.” Euro reversed sharply off this threshold with price closing lower on the week as daily momentum failed at 60 (typically bearish).
That said, the focus is on support into the start of the week and IF this pullback is corrective, losses should be limited to the lower parallel / 2018 low at 1.1216. Confluence resistance stands at the 3/21 outside reversal close / monthly open at 1.1370/72 with critical resistance steady at 1.1419/45 – a breach / close above this region is needed to validate a larger breakout targeting the median-line.
EUR/USD 120min Price Chart
Notes: A closer look at price action shows Euro trading within the confines of an ascending pitchfork formation extending off the yearly lows with last week’s decline rebounding off the 61.8% retracement of the March advance at 1.1280. Initial resistance now stands at 1.1340 backed by 1.1371/81 – a topside breach would put the focus back on 1.1419 and 1.1445– look for a bigger reaction there for guidance. Support rests at 1.1280 backed by the lower parallel, currently ~1.1240s – both levels of interest for possible downside exhaustion / entries IF reached.
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Bottom line: Euro pulled back from a BIG resistance-confluence last week at the yearly open and we’re looking for a low wile within the confines of this near-term formation. From a trading standpoint, the immediate risk remains for further losses while below the monthly open but we’re looking for a reaction / more favorable entries on a move towards the lower parallel. Ultimately a breach above 1.1445 would be needed to mark resumption.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
EUR/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.01 (50.1% of traders are long) – neutral reading
- Long positions are7.2% lower than yesterday and 8.3% higher from last week
- Short positions are 25.5% higher than yesterday and 20.2% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Euro prices may continue to fall. Yet traders are less net-long than yesterday but more net-long from last week and the 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 Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex