Euro has rebounded off key Fibonacci support with the recovery now testing resistance at the 1.13-handle ahead of tomorrow’s highly anticipated European Central Bank (ECB) interest rate decision. 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 Price Outlook we highlighted a key technical confluence in price, “with the immediate short-bias at risk while above Fibonacci support at 1.1186. From a trading standpoint, look for a break of the weekly opening-range for guidance with the topside favored while above 1.12.” Euro cleared the range highs early in the week with the advance now testing near-term confluence resistance at 1.1285 – 1.13 – a region defined by the 38.2% retracement of the March decline and the November 2016 high / August 2018 low / December low-day close.
A topside breach / close above this threshold is needed to keep the long-bias in play targeting the 61.8% retracement / 100-day moving average at 1.1347/54– look for a bigger reaction there IF reached. A break lower exposes longer-term slope support, which converges on operative downtrend support at ~1.1130s.
EUR/USD 120min Price Chart
Notes: A closer look at price action shows Euro trading within the confines of the ascending pitchfork formation we’ve been tracking since last week. A breach above the 61.8% parallel keeps the focus on subsequent resistance objectives at 1.1303 and 1.1322. Ultimately a breach above 1.1347 is needed to suggest a more significant low is in and validate a larger turn in price. Initial support rests at 1.1250 backed by near-term bullish invalidation at the lower parallel / 1.1230 – weakness below this threshold would once look to challenge the lows and beyond.
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Bottom line: Euro is testing near-term resistance here with the ECB interest rate decision on tap tomorrow. IF price is indeed heading higher, losses should be limited to the lower parallel with a breach above 1.1347 needed to fuel the next leg higher in price. From a trading standpoint, a good place to reduce long-exposure / raise protective stops. Look for exhaustion on a pullback towards slope support for guidance. A break of the lows would keep the focus on weekly EUR/USD slope support at 1.1130s.
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 +1.78 (64.0% of traders are long) – bearish reading
- Traders have remained net-long since March 26th; price has moved 0.3% lower since then
- Long positions are10.5% lower than yesterday and 11.8% lower from last week
- Short positions are26.1% higher than yesterday and 36.5% higher 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 & compared with last week and the recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant Euro / USEconomic Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex