In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Euro broke above a multi-month consolidation range with the advance targeting key resistance just higher. Here are the key targets & invalidation levels that matter on the EUR/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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EUR/USD Weekly Price Chart
Notes: In last month’s EUR/USD Weekly Technical Outlook we noted that the broader short-bias remained ‘vulnerable while above this region (1.13) heading into the close of the year.’ Euro registered a low at 1.1306 early in the month with the subsequent rally failing just ahead of key resistance this week. Note that RSI has not broken above 50 since the early-2018 breakdown – a close above would mark a change of behavior in the weekly momentum profile.
The levels remain unchanged heading deeper into January trade with critical resistance steady at 1.1586-1.1603 – a region defined by the March trendline, the 61.8% retracement and the September outside-weekly reversal close. ‘A breach / close above this threshold is needed to suggest that a more significant low is in place with such a scenario targeting subsequent topside objectives at 1.1727 and the median-line / 52-week moving average / September high at 1.1800/15.’
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Bottom line: The Euro advance is targeting critical downtrend resistance around the 1.16-handle (broader bearish invalidation). From a trading standpoint, the focus remains on a stretch into this region with a close above needed to suggest that a larger turn is underway. The immediate advance looks a bit vulnerable here so look for price to stabilize above the monthly open at 1.1445 if this is going to work. I’ll publish an updated EUR/USD technical outlook once we get further clarity on near-term price action.
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EUR/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.05 (+51.3% of traders are long) – neutral reading
- Long positions are 8.2% higher than yesterday and 1.1% higher from last week
- Short positions are 23.5% lower than yesterday and 5.9% 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. Traders are more net-long than yesterday but less net-long from last week and the combination of current positioning& recent changes gives us a further mixed EUR/USD trading bias from a sentiment standpoint.
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Relevant EUR/USD Data Releases
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Previous Weekly Technical Charts
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— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex