EUR Technical Analysis

The pattern the past few months in these times of extraordinarily low volatility has been for moves in the Euro, in both directions, to look like they want to build on momentum only to reverse. We are about to find out if this latest installment of weakness can last or will those who just sold be kicking themselves as another breakdown turns out to be false.

If the pattern is to change then EURUSD can't burst higher in the coming days, it can bounce around a bit, but it can't rip and take back with it the Thursday dagger down day. If only a minor bounce happens then the trend of quick reversals may be over, and a sustainable downdraft may be in the works in the days/weeks ahead.

In the event of more weakness below the Jan-current underside channel line and Jul 2015 t-line, the area around 11100 will become the next important spot to watch price action, where the trend-line running lower from November 2017 intersects with a minor swing-low created during June of that same year. A decent number of support lines running through the vicinity just below, but broader trend forces and pent up volatility ready to pop may be enough to help the Euro soon slice through…

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The Euro has stalled near one-month support after recoiling from resistance capping upside progress against the US Dollar since late September 2018. That barrier has also established a shallow but unmistakable series of lower highs. Indeed, prices appear to be stair-stepping lower, despite a lot of chop along the way.

From here, a daily close below the March 7 low at 1.1176 opens the door for a test of the 1.1110-32 area, marked by a range floor dating back to mid-2017. Thorough invalidation of the near-term bearish bias is some way off, calling for a daily close above trend line resistance now situated at 1.1412.

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As EURGBP approaches the next major resistance level, which is a range between 0.8923 and 0.8953 on the chart below, keep an eye on support. That would be a rising channel going back to the middle of May highlighted in red below. Meanwhile, negative RSI divergence warns that upside momentum is fading. This can lead to a turn lower ahead.

Meanwhile, IG Client Sentiment is showing that EURGBP is one of the most heavily-invested net-short trade when comparing overall conviction to other currencies, commodities and equities. This is still offering a EURGBP bullish-contrarian trading bias and may result in further gains down the road.

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The Euro and US Dollar also look ripe for volatility next week with an update on Germany’s labor market on early Tuesday at 7:55 GMT and the release of the Institute of Supply Management’s US Manufacturing PMI shortly after at 14:00 GMT. According to the 1-week implied volatility reading of 6.28 percent, spot EUR/USD is estimated to fluctuate between 1.1280-1.1478 next week. Technical resistance posed by the 61.8% Fibonacci retracement of the currency pair’s year-to-date trading range near the 1.14 handle, which has previously served as a major confluence level, could keep upside in spot EUR/USD at bay.

EUR/USD price action could be stirred further later in the week as traders react to the closely-monitored US Nonfarm Payroll (NFP) data due for release Friday at 12:30 GMT. Another surprise to the downside following last month’s NFP report will likely echo bullish conviction that appears to have developed since the start of the month. However, an upbeat US jobs report threatens to send EUR/USD swooning with potential to test support at the 1.1300 price level.

That being said, spot EUR/USD performance over the short-term will likely be driven largely by the market’s expectation for the Federal Reserve to make a move on rates. According to overnight swaps, rate traders are currently pricing a 25-basis point reduction in the central bank’s policy interest rate as a near-certainty with an additional 24.0 percent probability of a 50-basis point reduction in Fed’s benchmark policy rate. Consequently, upbeat US economic data risks reducing the market’s expectation that the Fed will cut rates at its next FOMC meeting and bolstering the greenback in turn.

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Prices are now pinned to neckline support-turned-resistance just above the 1.12 mark. A daily close above that faces minor upside barriers at 1.1286 and 1.1348 along the way to a challenge of the June 25 swing top at 1.1412. Alternatively, a move back below 1.1107 paves the way for another probe of the August 1 bottom (and two-year low) at 1.1027.

With near-term positioning looking conflicted once again, reviewing the overall trend bias is useful. The monthly chart points to a broadly bearish bias, with resumption of a more than decade-long EUR/USD downtrend making steady (if modest) headway after a break of support near 1.15 in October 2018. A break below the inflection point at 1.0980 could expose a range floor near 1.05.

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Hi Scorpion, i thing you look for this indicator 2, for me my favorite is 1 and 240 moving average. BUT no miracles indicators they are always tell you the PAST

Since reaching its three-year peak on August 8, EUR/GBP has declined almost five percent. Along the way down, the pair broke through several critical support channels and layers, leaving EUR/GBP now exposed to a critical floor at 0.8924.

A break below key support with follow-through could prompt an aggressive selloff as traders lose faith in the pair’s upside potential – at least for now. Conversely, a recovery from the floor could stave off a rapid decline with traders eyeing the next level of resistance at 0.9039.

However, these technical set ups could be in danger of being derailed by sporadic Brexit-related developments that have been a key catalyst behind GBP’s price action. Therefore, traders may hesitate to add exposure or enter positions until more clarity is given to the entangled political debacle we call Brexit.

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Euro Forecast: 1.0777 is the bearish target; 1.1406 is the resistance level for the bullish trend to be resumed

• EUR/USD reversed direction last week as it turned sharply lower in response to a decision by the European Central Bank to keep Eurozone interest rates unchanged rather than cut them as most traders and analysts had expected.
• The ECB’s decision raised fears that it is failing to respond sufficiently to the threat of an economic recession prompted by the Covid-19 coronavirus pandemic.
• The downturn in EUR/USD may therefore continue even though the US Federal Reserve is expected to cut US interest rates again this week to help stimulate the US economy.

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