Euro has rallied nearly 0.6% against the US Dollar since the start of the week with the price recovery now testing monthly open resistance heading into the close of April trade. These are the updated targets and invalidation levels that matter on the EUR/USD charts this week with the FOMC & NFPs on tap. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
EUR/USD Daily Price Chart
Technical Outlook: In my latest EUR/USD Weekly Technical Outlook we noted that price was approaching weekly support at 1.1186, “with a break below the 2017 pitchfork support around ~1.1130s needed to validate a larger break of the multi-year uptrend formation in Euro.” Price registered a low at 1.1111 before reversing sharply higher to close back above pitchfork support last week.
Look for initial support at 1.1186 with near-term bullish invalidation now set to the yearly low-day close at 1.1139– a close below this threshold is needed to mark resumption of the broader downtrend targeting the lower parallel and channel support, currently around ~1.11. Confluence daily resistance stands at 1.1228/39 where the median-line converges on the monthly open and the 38.2% retracement. A breach / close above would be needed to suggest a more significant low is in place.
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EUR/USD 120min Price Chart
Notes: A closer look at price action shows Euro testing monthly open resistance today at 1.1228 after breaching above near-term trendline resistance extending off the monthly highs. Look for exhaustion ahead of 1.1175 IF this breakout is legit with a breach above the 61.8% retracement at 1.1242 needed to fuel the next leg higher in price. Subsequent topside objectives at ~1.1280 and the April high-day close at 1.1299 – expect a bigger reaction there IF reached.
Bottom line: Euro has responded to longer-term slope support and price needs to hold above the low-day close to keep the long-bias viable. From a trading standpoint, the immediate risk is for a pullback here but we’re looking for downside exhaustion while above 1.1175. Keep in mind we’re heading into the start of a new month with the FOMC and US Non-Farm Payrolls (NFP) on tap- stay nimble here.
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 +1.27 (55.9% of traders are long) – weak bearishreading
- Traders have remained net-short since April 12th; price has moved 0.5% lower since then
- The percentage of traders net-long is now its lowest since April 17th
- Long positions are24.0% lower than yesterday and 6.1% lower from last week
- Short positions are31.9% higher than yesterday and 0.9% 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 & compared with last week and therecent 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 / US Economic Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex