Euro Technical Forecast: EUR/USD Drops Toward Trend Support- Big Decision Ahead

Euro Technical Forecast: EUR/USD Weekly Trade Levels

Euro has spent the past four-weeks capped below key resistance, with the pullback extending more than 1.6% off the December highs
Th EUR/USD selloff is now approaching confluent uptrend support, putting focus on a potential inflection in the days ahead
Key US inflation data next week will be critical for USD as Fed rate cut odds get pushed back
Resistance 1.1747/75 (key), 1.1917/19, 1.2020 - Support 1.1598 (key), 1.1497-1.1505, 1.1394

Euro marked a second-consecutive weekly decline on Friday with EUR/USD extending a steady pullback that has carried price more than 1.6% off the December highs. Losses have now brought the pair within striking distance of a confluent uptrend support zone, placing focus on a possible inflection as the new year begins. The reaction here will be critical in determining whether the late-December decline was simply a corrective move within the broader structure or the start of a more significant trend reversal. Battle lines drawn on the EUR/USD weekly technical chart heading into key inflation data next week.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this EUR/USD technical setup and more. Join live on Monday’s at 8:30am EST.

Euro Price Chart – EUR/USD Weekly

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

Technical Outlook: In last month’s Euro Technical Forecast we noted that EUR/USD was trading within a well-defined range and to, “Look for the breakout to offer guidance into the close of the year. From a trading standpoint, the immediate focus is on a breakout of the embedded December opening-range- losses would need to be limited to the 1.1589 IF price is heading higher on this stretch…” EUR/USD broke higher two-days later with the advance surging nearly 3% of the November low before exhausting at key resistance at 1.1747/75- a region defined by the 2025 high-week close (HWC), the 61.8% retracement of the September decline, and the 2025 high-close.

Euro spent four-weeks below this key threshold before pulling back with the EUR/USD declining nine of-the-past eleven trading days. The losses extending more than 1.6% off the December highs this week with initial weekly support now in view at the 61.8% retracement of the November advance at 1.1598. Note that the 75% parallel converges on this level over the next few weeks and the focus is on a reaction off this mark IF reached. A break / weekly close below would suggest that a more significant high is in place / a larger correction is underway with subsequent support objectives seen at 78.6% retracement of the July rally and the March 2020 / 2022 high at 1.1497-1.1505, and the April high-close at 1.1394. The next major technical consideration rests with the 38.2% retracement of the 2025 range and the 2023 swing high at 1.1254/76.

A topside breach above 1.1775 is needed to mark uptrend resumption with such a scenario exposing the 2025 swing high and the 100% extension of the 2022 advance at 1.1917/19 backed by the 38.2% retracement of the broader 2008 decline at 1.2020. Note that the upper parallel converges on this threshold into March – look for a larger reaction there IF reached. Subsequent resistance is eyed at the 2017 swing high near 1.2092.

Bottom line: Euro turned key resistance into the start of the month with the decline now approaching confluent uptrend support. From a trading standpoint, the focus is on possible inflection into 1.1598- a reaction there will likely determine if the late-December pullback was simply a correction or whether a larger trend reversal will take shape into the start of the year.

Keep in mind that key U.S. inflation data is due next week, with the December Consumer Price Index (CPI) scheduled for release on Tuesday. With today’s Non-Farm Payrolls report pointing to a labor market that remains steady, attention now shifts to the other side of the Federal Reserve’s dual mandate. As a result, the timing of the next rate cut is likely to hinge on the pace of inflation in the months ahead. Stay nimble into the release and watch the weekly closes here for guidance. I’ll publish an updated Euro Short-term Outlook once we get further clarity on the near-term EUR/USD technical trade levels.

Key Euro / US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts

--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex

The information on this web site 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. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of StoneX Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor