Euro Short-term Outlook: EUR/USD Recovery Stalls at Trend Resistance

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

• Euro breaks below February uptrend- plunges nearly 4.4% off yearly high
• EUR/USD near-term recovery off support fails at trend resistance- range breakout to offer guidance
• Resistance 1.1248/76, 1.1329, 1.1379 (key)- Support 1.1142, 1.1040/74 (key), 1.0948

The Euro bears are struggling to mark a fourth-consecutive weekly decline with a rebound off key technical support failing at trend resistance. The rebound highlights the potential for a weekly range-breakout in the days ahead. Battle lines drawn on the Euro short-term technical charts into the close of the week.

Euro Price Chart – EUR/USD Daily

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

Technical Outlook: In my last Euro Short-term Technical Outlook we noted that, “While the broader outlook is still constructive, the threat remains for a larger correction while below the 1.14-handle and the immediate focus is on a breakout of the weekly opening-range for guidance.” That range broke lower last week with the subsequent decline extending nearly 4.4% off the yearly high. Euro rebounded off confluent support this week at 1.1040/74- a region defined by the 38.2% retracement of the yearly range and the 100% extension of the April decline.

Does this pullback complete a four-week correction (two-equal legs off the high) or does the break of the February uptrend suggest a larger setback is underway? The rally failed at trend resistance yesterday, and the focus now shifts to a breakout of this week’s range for guidance with the bulls still vulnerable while within this channel.

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 continuing to trade within the confines of the descending pitchfork we’ve been tracking off the monthly highs. Initial support now rests with the 61.8% retracement of the weekly range near 1.1142 with a break of the weekly range lows needed to mark resumption of the late-April downtrend. Subsequent support objectives rest with the March high-close / July high at 1.0948 and the 200-day moving average, currently near the 1.08-handle.

Initial resistance is eyed at 1.1248/76-a region defined by the objective weekly open, the 38.2% retracement of the April decline, and the 2023 swing high. Note that the upper parallel converges on this threshold over the next few days and a breach /close above this slope would be needed to suggest a more significant low is in place / a larger reversal is underway. Subsequent technical considerations eyed at the objective monthly open at 1.1329 and the 61.8% retracement at 1.1379- advances past this threshold would mark resumption of the broader uptrend.

Bottom line: A break below the February uptrend has rebounded off initial support and a test of resistance yesterday puts the focus on a breakout of this week’s range. Risk remains for a larger correction while within this near-term formation. From a trading standpoint, rallies would need to be limited to 1.1276 IF price is heading lower on this stretch with a break / close below 1.1040 needed to fuel the next leg of the decline. Watch the weekly close tomorrow. 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.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex