EUR/USD Averts Meltdown- But for How Long?

Euro Technical Price Outlook: EUR/USD Weekly Trade Levels

• Euro updated technical trade levels & sentiment – Weekly Chart
• EUR/USD recovery approaching downtrend resistance– risk for price inflection
• Weekly support 1.0620/37, 1.0516, 1.0409(critical); resistance 1.0787-1.0821, 1.0940(key), 1.11

Euro has rallied more than 4.2% off the yearly lows against the US Dollar with EUR/USD testing a key resistance pivot into the June open. A rebound off downtrend support takes price within striking distance of downtrend resistance and we’re looking for possible price inflection in the days ahead for guidance. These are the updated targets and invalidation levels that matter on the EUR/USD weekly price chart heading into the ECB next week. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro technical setup and more.

Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Technical Strategist; EUR/USD on Tradingview

Notes: In my April Euro Weekly Price Forecast we warned that EUR/USD was approaching the 2020 lows and that, “rallies should be capped by last week’s high IF price is heading lower with a weekly close sub-1.0637 needed to mark resumption to fresh multi-year lows.” Price plummeted through support into the close of the week with Euro rebounding sharply off confluent support at the lower parallel / 2017 low at 1.0340(low registered at 1.0348). Was a more significant low registered last month?

Euro is testing confluent resistance this week at 1.0786-1.0821– a region defined by the 38.2% Fibonacci retracement of the yearly range, the March low and the 23.6% retracement of the 2021 sell-off. We’re on the lookout for possible price inflection here with a breach / close above the 2019 low-close at 1.0940 needed to suggest a larger reversal may be underway towards 1.11. Initial weekly support now rests at 1.0620/37 backed by the 61.8% retracement at 1.0516. Ultimately a break below the yearly low-week close at 1.0409 would be needed to mark resumption of the broader downtrend.

Bottom line: The Euro recovery is now testing initial resistance hurdles here into 1.08. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- losses should be limited to 1.0516 IF price is heading higher on this stretch with a breach of the 2021 channel needed to shift the medium-term focus back to the topside. Stay nimble heading into the European Central Bank (ECB) interest rate decision and Core US inflation data on tap next week. Review my latest Euro Price Outlook for a closer look at the near-term EUR/USD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Euro Trader Sentiment – EUR/USD Price Chart

• A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.21 (54.73% of traders are long) – typically a weak bearish reading
• Long positions are5.75% lower than yesterday and 5.71% lower from last week
• Short positions are3.67% higher than yesterday and 12.18% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

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— Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex