EUR Technical Analysis

The Euro might be getting ready to make a more lasting move higher against its British counterpart within a descending channel from late-2017. On the chart below, a morning star candlestick bullish reversal pattern has formed right below a short-term falling line from early March. Even so, confirmation via a close above immediate resistance will be needed to argue that EUR/GBP is turning higher.

Simultaneously, positive RSI divergence has accompanied the pair’s descent as of late and signals that downside momentum is slowly decreasing. This could be used as another argument that prices may indeed reverse higher soon.
From here, a push above the short-term line exposes the March 27th high at 0.8797. The next target would be the 50% midpoint of the Fibonacci retracement at 0.8817. Following that is the 61.8% level at 0.8852.

On the other hand, if prices keep pushing lower, immediate support is the February 1st low at 0.8714. This horizontal area caught EUR/GBP as it fell in March and kept it up on multiple occasions. If prices manage to break through, the next target will be the 38.2% Fibonacci extension at 0.86682. A push below that exposes the March 22nd low at 0.8666 and then the lower line of the descending channel.

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The Euro continues to inch upward against the British Pound but the dominant price trend continues to favor a downside bias for the single currency. The pair has recovered to the highest level in nearly two months but price action remains firmly locked within a falling channel set from October 2017.

Major resistance comes in at 0.8904, the confluence of a former chart inflection point as well as the trend channel top. A close above that confirmed on a daily closing basis exposes the March 7 high at 0.8968. Alternatively, a turn below resistance turned-support at 0.8797 targets counter-trend support at 0.8730.

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The Euro managed to score the largest one-day gain in six weeks against the US Dollar but the dominant trend bias continues to favor on-going weakness. Long-term positioning suggests the single currency marked the resumption of a decade-long down trend with April's monthly close.

From here, a daily close above the 61.8% Fibonacci retracement at 1.1937 opens the door for a retest of former support in the 1.2055-92 area (50% level, September 8 high). Alternatively, a move below the chart inflection point at 1.1825 paves the way for a challenge of the November 21 low at 1.1713.

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EURUSD: Retail trader data shows 58.4% of traders are net-long with the ratio of traders long to short at 1.4 to 1. In fact, traders have remained net-long since Apr 30 when EURUSD traded near 1.21294; price has moved 3.5% lower since then. The number of traders net-long is 0.1% higher than yesterday and 9.8% higher from last week, while the number of traders net-short is 16.7% lower than yesterday and 14.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bearish contrarian trading bias.

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On the weekly chart, the euro tried to put in a modestly bullish reversal bar, but it's certainly not of the high-conviction variety. Perhaps we will see a bit of early-week weakness in the euro, but as long as last week's low at 11510 holds, then the outlook is neutral at worst, tentatively bullish for a recovery bounce.

A break below support will be reason for abandoning a bullish bias and working with the continued trend lower. It's a bit of a tricky spot down here, but, again, there is a solid floor at the euro's feet to work with in the days ahead.
Resistance by way of a few lows from last year will need to be cleared on the daily time-frame to garner top-side momentum; over 11760 should be enough to bolster buyers into pushing EUR/USD higher.

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There is a key zone of support from around 11730 down to 11660, which EURUSD held on several occasions during the latter part of last year. The euro was able to recapture this once strong level of support last week and will be our first zone to watch for a higher-low to develop.

Should we see buyers step up in the aforementioned zone, we'll be look for at least one more thrust higher towards the 11900/12000-area. A successful test could already be in the rear-view mirror as not only on Friday did the top of the zone hold, but the trend-line off last week's low (most easily visible on the 4-hr chart) provided support as well.
Even if the trend-line and Friday low were to break, as long as the low-end of the zone holds, the euro will remain in play for a dip-trip. If an aggressive decline starts to unfold, though, the trend-line extending higher from January 2017 will again come into play, along with the weekly support from 2015/16.

It will be extremely important for those lower support levels to hold to keep the euro from quickly sinking much further. And even if a test and hold is successful at that point, the deeper retracement off the swing-high will take the wind out of the sails for the long-side until further repair can be done.

We should learn a lot as to how the market feels about the euro in the week ahead with the FOMC on Wednesday and, even more importantly, the ECB on Thursday. With higher-than-normal volatility expected next week traders will want to adjust risk parameters accordingly.

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The Euro may be on the verge of resuming the down move started in mid-Mayagainst the US Dollar following a brief corrective upswing. Looking at the four-hour chart, prices are on the verse of clearing counter-trend support after failing to breach resistance in the 1.1821-47 area.

Zooming out to the daily chart, a down move that takes prices back below the 1.1642-1.1723 area marked by the 14.6% and 23.6% Fibonacci retracement levels would open the door for another challenge of the 1.1527-77 zone. This is reinforced by the May 29 low at 1.1510.

The EUR/USD short trade started from 1.2407 and thereafter scaled up near the 1.19 figure continues to be in play with net cost basis of 1.2276. Building out larger exposure upon confirmation of the counter-trend break is compelling but the looming ECB rate decision argues for caution. The trade will remain as-is for now, with a stop-loss to be activated on a discretionary basis.

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On Thursday, the ECB's cautious stance on the removal of monetary stimulus sent EUR/USD down sharply, the biggest move in recent memory. This has price support running back to 2015 and the January 2017 trend-line squarely under assault again.

The thinking on this end is that we will see some backing-and-filling in the days ahead as the market digests the impact of Thursday's outcome. This could make for less-than-ideal trading conditions in the very near-term as the euro chops around. Overall, though, the bias right now is that any bounce from here, despite coming from support, is likely to be short-lived.

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The past week has seen the recovery in EURUSD gather steam with the break above notable resistance at 1.1720-25 confirming that the pair has based out at 1.15, while signaling that the momentum is on the upside. As such, this opens a run in for the June 14th high at 1.1850, which is the final hurdle before a potential move towards the key 1.20 level. However, if the pair falls back towards 1.1600-50 could suggest another corrective move to test 1.1500-10 support zone.

Looking ahead towards next week, risks event on the docket for the Euro will be the US and German inflation figures. In regard to price action, a close above current resistance at 1.1753, which marks the 23.6% Fibonacci Retracement of the 1.2555-1.1508 could act provide support for the forthcoming week. On the downside, support also comes from the rising trendline from January 2017, residing at 1.1640 and coinciding with the 20DMA.

Those bullish on the Euro will find solace in the fact the Relative Strength Index on the daily and weekly charts suggest the bias is tilted to the upside, which suggest that the recent reversal in price action is likely to continue.

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Gains in the pair stalled ahead of the 1.18 handle, while the failure to close above resistance at 1.1775, allows for the pair test lower levels at 1.17, however, the rising trendline from Jan 2017 continues to offer support. Previous resistance at 1.1720 will be the next target on the upside with 1.1755, which marks the 23.6% Fibonacci retracement of the 2018 peak - 2018 low another level of interest on the upside. In the short term, EURUSD has softened, however, on the weekly timeframe, momentum is towards the upside, a close above the aforementioned 1.1775 level can allow for a run in on 1.1820.

Upside bias in the cross remains intact having made a break above the trendline resistance from the 2018 high. Following the break, eyes are now on the double top posted in May at 131.40, before a grind towards the 132 handle. The 100DMA situated at 130.10 now acts as support for the cross, while RSI indicators suggest that there is more room for further gains with the index not yet moved into overbought territory.

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