Euro Short-term Outlook: EUR/USD Trapped in Downtrend- Breakout Risk Brewing

Euro Technical Outlook: EUR/USD Short-term Trade Levels

EUR/USD has pulled back more than 1.6% from the December highs, with price remaining confined within a multi-week downtrend
Weekly opening-range is set just below resistance- A break above the upper bounds is needed to invalidate the current downtrend, while failure here keeps downside pressure intact into more significant support.
Resistance 1.1691-1.1703 (key), 1.1735/46, 1.1794-1.1813- Support 1.1634, 1.1590/98 (key), 1.1542

The Euro remains under pressure after a two-week decline from the December highs, with EUR/USD trading within the confines of a well-defined near-term downtrend. The weekly opening-range is carved just below downtrend resistance and now serves as a near-term pivot for price action. The focus is on whether the pair can break out of this range to signal a trend shift, or if the downtrend remains in control and drives price toward more significant technical support just lower. The reaction around this zone is likely to be decisive in determining direction for the Euro into the close of the month. Battle lines are drawn on the Euro short-term technical charts.

Euro Price Chart – EUR/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Technical Outlook: In last month’s Euro Short-term Technical Outlook we noted that the EUR/USD outlook remained, “constructive with the immediate focus on a reaction into near-term uptrend resistance. From a trading standpoint, losses should be limited to 1.1679 IF price is heading higher on this stretch with a close above 1.1747 needed to fuel the next leg of the advance.” The rally continued in the following days with price registering an intraday high at 1.1808 on Christmas Eve before reversing off confluent resistance at 1.1794/.1813- a region defined by the 1.618% extension of the November advance and the 2025 high-day close (HDC).

The pullback has now extended more than 1.6% off the December high with the weekly opening-range set just above the November HDC at 1.1634. Look for a breakout here in the days ahead to offer guidance with the multi-week downtrend still in play while below the 1.17-handle.

Euro Price Chart – EUR/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Notes: A closer look at Euro price action shows EUR/USD trading within the confines of a descending pitchfork extending off the December high. Resistance is eyed at the 38.2% retracement of the recent decline and the mid-December swing lows at 1.1691-1.1703- note that the upper parallel converges on this threshold over the next few sessions and a topside breach / daily close above is needed to invalidate the multi-week downtrend in Euro. Subsequent resistance is eyed at the 61.8% retracement and the objective yearly open at 1.1735/46 with a breach above 1.1794-1.1813 still needed to mark resumption of the broader uptrend.

A break below the median-line would expose the next key support zone at 1.1590/98- a region defined by the December low, the 100% extension of the late-December decline, and the 61.8% retracement of the November advance. Look for a larger reaction there IF reached with losses below the 200-Day moving average at (currently ~1.1577) needed to suggest a more significant correction is underway. The next major technical consideration rests with the November low-day close (LDC), and the March 2020 / 2022 highs at 1.1492/97.

Bottom line: Euro is trading within the confines of a near-term downtrend off the late-December high with the weekly opening-range carved just below downtrend resistance. From a trading standpoint, rallies would need to be limited to 1.1703 IF price is heading lower on this stretch with a close below the weekly open needed to fuel the next leg of the decline. Ultimately a larger setback here may offer more favorable opportunities closer to trend support.

Keep in mind the next major economic data release is slated for next week with Personal Consumption Expenditures (PCE) on tap Thursday. This is the Fed’s preferred inflationary gauge and will be critical in determining the timing of the central bank’s next rate cut. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest Euro Weekly Technical Forecast for a closer look at the longer-term EUR/USD trade levels.

Key EUR/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on Twitter @MBForex

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.