Euro Technical Forecast: EUR/USD Breaks Out to 3-Year Highs

EUR/USD, Euro Talking Points:

• EUR/USD continues a sharp rally as the pair has pushed to fresh three-year highs.
• Dovish Fed-speak and potential for US rate cuts has helped to drive both USD-lower and EUR/USD higher, and tomorrow brings Core PCE as investors get the next look at inflation data out of the U.S.
• I’ll be looking into EUR/USD price action during the next weekly webinar, and you’re welcome to join. Click here to register.

It’s turned out to be a big week for EUR/USD. After the pair held inside of prior highs last week, while testing support at the 1.1500 handle even through this week’s open, a more-dovish sounding FOMC has helped to prod a breakdown in the U.S. Dollar and, in-turn, a breakout in EUR/USD. The pair now trades at fresh three-year highs and RSI on the weekly chart is back into overbought territory.

The current high is holding right at the 78.6% retracement of the 2021-2022 major move, and the Fibonacci sequence from that trend has brought multiple inflections so far this year, going back to the support at 1.0200 in January which is the 23.6% retracement of that same major move.

This is a tough trend to chase given that overbought context, but the there’s little evidence yet that buyers are willing to cede control, and I’ll look at shorter-term structure below.

EUR/USD Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Daily

From the daily chart we can see EUR/USD pushing into overbought conditions as well, mirroring that monthly look above. And this makes the move as a bit more difficult to chase. One-sided moves of that nature can be prone to snap backs as heavy one-sided positioning seeks to exit suddenly, particularly in the face of data that goes against the recent trend.

In this case, that could mean higher-than-expected Core PCE tomorrow morning as inducing pullback from an overbought trend. If that happens, the big question after is whether or where buyers show up to offer higher-low support.

EUR/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Four-Hour

From the four-hour chart we can see the recent bullish structure that EUR/USD bulls have been pressing into fresh three-year highs.

The 1.1500 level remains a key decision point and we saw that in-play earlier in the week as prices had pulled below that level ahead of the U.S. open on Monday. A dovish comment from Michelle Bowman, saying that she was open to a rate cut in July, helped to reverse that sell-off and price quickly went up for re-test of 1.1632 which remains a big spot on the chart.

Later in the week, we heard from Chair Powell as he testified in front of Congress, and while last week’s press conference after the rate meeting he sounded somewhat hawkish around inflation expectations from tariffs, the tone seemed quite a bit different this week as Congress questioned that assertion; in-turn, the U.S. dollar continued to drop and EUR/USD continued to breakout, leading to the current three-year highs that traded this morning.

There’s a Fibonacci level of note at 1.1686 and I had looked at that in yesterday’s video. That’s what I’m looking at as an ‘s1’ level of support at the moment. Below that, we have the spot of resistance from a couple weeks ago that put in a pause earlier in the week with the breakout. And below that, we have a zone from the swing-low that showed just after that resistance hit and pullback appeared, which I’m classifying as an ‘s3’ zone of support for EUR/USD at the moment.

EUR/USD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist