Euro Short-term Outlook: EUR/USD Breakout Risk Builds Into Month-End

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

• EUR/USD has tested both ends of the monthly range, leaving the pair at a pivotal technical inflection point.
• The weekly and monthly opening ranges remain intact just above critical support- breakout pending.
• A topside breach would weaken the multi-month downtrend, while a loss of support would favor another leg lower.
• The FOMC decision, Core PCE inflation, and Eurozone CPI could provide the catalyst for the next major move.
• Resistance 1.1422, 1.1483/92 (key), 1.1576/78- Support 1.1355/60 (key), 1.1276, 1.1214

EUR/USD enters the final days of the month with both sides of its monthly range now tested, leaving the pair at a pivotal technical crossroads ahead of today's FOMC rate decision. The broader downtrend remains intact, but the weekly and monthly opening ranges continue to hold just above critical support as traders await a decisive catalyst. With the Fed and key US / Eurozone inflation data on tap into the monthly close, the next breakout could provide important directional guidance heading into August trade. Battle lines drawn on the Euro short-term technical charts.

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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 EUR/USD was trading within a well-defined monthly opening range, just above support and that, “From a trading standpoint, rallies would need to be limited to 1.1492 IF price is heading lower on this stretch with a close below 1.1355 needed to fuel the next leg of the decline.” Euro rallied in the following days with price registering an intraday high at 1.1483 before reversing. The decline extended more than 1.1% off the highs with price registering an intraday low yesterday at 1.1353. Both sides of the range have now been tested, and the focus is on a breakout into the close of the week / month with the FOMC rate decision on tap later today.

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 have been tracking of May high. The weekly opening range is now set just below the objective monthly open at 1.1422. A topside breach above this threshold is needed to invalidate the multi-week downtrend. Ultimately, a daily / weekly close above the 1.618% extension of the April decline and the November low-day close (LDC) at 1.1483/92 would be needed to suggest a more significant low is in place and a larger trend reversal is underway. Subsequent resistance objective eyed at the May and January lows near 1.1576/78.

A break / daily close below this pivotal support zone would threaten resumption / acceleration of the broader downtrend. Subsequent support objectives rest with the 2023 high at 1.1276 and the 2024 swing high at 1.1214. The next major technical consideration rests with the 100% extension of the January decline at 1.1178.

Bottom line: The monthly & weekly opening ranges are preserved just above critical support, and the focus is on a breakout in the days ahead for guidance. From a trading standpoint, rallies would need to be limited to 1.1422 IF price is heading lower on this stretch with a close below 1.1355 needed to fuel the next major leg of the decline.

The FOMC rate decision is on tap this afternoon and although no change is expected, traders will be parsing Fed Chair Warsh’s comments on inflation considering the recent escalation in the Iran conflict and subsequent surge in oil. Ahead of today’s meeting, Fed funds futures imply a roughly 34% chance of a hike this week and a 75% probability of at least one 25-basis-point increase by September. Keep in mind we still have key economic data in the days ahead with Core PCE, the Fed’ preferred inflationary gauge, and Eurozone inflation on tap into the close of the week / month. Stay nimble into the monthly cross and watch the weekly close for directional guidance heading into August. Review my latest Euro 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, Senior Technical Strategist

Follow Michael on Twitter @MBForex