Euro is threatening a four-day winning streak against the US Dollar with the recent price rally failing at the 1.15-handle today in New York. The immediate threat is lower near-term, but the broader outlook remains constructive and we’re looking for a pullback to offer more favorable opportunities. 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 Technical Price Outlook we noted that the pullback was, ‘approaching monthly up-trend support just lower and IF price is heading higher, Euro would need to hold above slope support.” A brief stint below pitchfork support saw a test of the December low-day close at 1.1303 before reversing sharply on January 25th with the advance now testing the monthly high-day close at 1.15. A close above this threshold is needed to fuel the next leg higher targeting the high-close at 1.1542 backed by the 200-day moving average and the 61.8% retracement of the 2018 range at 1.1586.
EUR/USD 120min Price Chart
Notes: A closer look at price action show EUR/USD trading within the confines of an ascending channel formation extending off the monthly lows with price Euro turning just pips from slope resistance today. Initial support now rests back at monthly / yearly open at 1.1449/50 backed closely by the lower parallel – a break there would suggest a larger correction is underway with such a scenario exposing the weekly open at the 1.14-handle (near-term bullish invalidation). Resistance remains at 1.15 with a breach above the weekly range-highs targeting the highlighted resistance confluence at 1.1542.
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Bottom line: The immediate risk is lower in price but IF Euro is indeed heading higher, losses should be limited to the 1.14-handle. From a trading standpoint, I’m looking for downside exhaustion on a move lower to offer more favorable long-entries while above 1.1350 targeting the yearly high-close. Review my EUR/USD Weekly Technical Outlook for a look at the longer-term trading levels heading into the close of the month.
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-short EUR/USD – the ratio stands at -1.2 (45.5% of traders are long) – bullishreading
- Long positions are13.2% lower than yesterday and 35.7% lower from last week
- Short positions are 7.6% higher than yesterday and 47.5% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Traders are further net-short than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant EUR/USD Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex