Euro reversed off downtrend resistance against the US Dollar last week with decline now testing monthly open support. The immediate focus is on a breakout of last week’s range – these are the updated targets and invalidation levels that matter on the EUR/USD price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro price setup and more.
Euro Price Chart – EUR/USD Daily
Technical Outlook: In this month’s Euro Weekly Price Outlook we noted that EUR/USD was “poised to mark a massive reversal candle off slope support – IF EUR/USD has indeed turned the corner, look for exhaustion pullbacks to be limited to the monthly open.” A brief retest of the September opening-range lows post-ECB unleashed a rally into confluence resistance on Friday at 1.1107- price has pulled back from this threshold early in the week with the decline once again approaching monthly open support at 1.0990. We’re now looking for a breakout of the weekly opening-range for guidance
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Euro Price Chart – EUR/USD 240min
Notes: A closer low at Euro price action sees EUR/USD continuing to trade within the confines of a descending pitchfork formation extending off the June highs with the upper parallel further highlighting resistance last week at 1.1107/12 – a region defined by the May lows and the 38.2% retracement of the June decline. The pullback is now testing initial support at 1.0990/96 with the 2019 low-day close just lower at 1.0973– a break / close below this threshold is needed to mark resumption of the broader downtrend targeting the yearly low at 1.0926.
Weekly open resistance stands at 1.1073 with a breach above the Friday highs needed to suggest a more significant low was put in this month. Such a scenario would shift the focus back towards subsequent resistance objectives at 1.1167 & 1.1187.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: Euro turned from downtrend resistance last week and the focus is on a test of key support targets just lower with a hold above the low-day close needed to keep the rebound viable. From a trading standpoint, a good place to reduce short-exposure / lower protective stops – looking for signs of possible exhaustion ahead of 1.0973. Ultimately a breach above 1.1112 is needed to put the bulls in control.
Euro Trader Sentiment – EUR/USD Price Chart
- A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.37 (57.9% of traders are long) – weak bearish reading
- Traders have remained net-long since July 1st; price has moved 1.9% lower since then
- Long positions are 6.6% lower than yesterday and 13.2% lower from last week
- Short positions are4.9% lower than yesterday and 1.4% 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.
See how shifts in Euro retail positioning are impacting trend- Learn more about sentiment!
Key Euro / US Data Releases
Economic Calendar – latest economic developments and upcoming event risk.
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– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex
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