Euro Short-term Outlook: EUR/USD Holds Lows – Breakout Risk Builds

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

• EUR/USD plunges more than 3.1% from uptrend resistance at four-year highs  
• Euro rebounds off downtrend support- weekly opening-range breakout imminent
• Resistance 1.1625, 1.1645, 1.1686 (key)- Support 1.1565, 1.1505/14 (key), 1.1392

The Euro has stabilized after a steep decline from the yearly highs, with EUR/USD holding above downtrend support into the weekly open. While the broader outlook remains bearish, the pair is consolidating within a tight range, and a breakout of the weekly opening range may confirm the next directional move. Battle lines are 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 last month’s Euro Short-term Technical Outlook we noted that EUR/USD was, “testing support at the August trendline with the weekly opening-range preserved just above. Looking for a breakout in the days ahead for guidance. From a trading standpoint, rallies should be limited to the weekly high IF EUR/USD is heading for a break lower on this stretch with a close below 1.1687 needed to fuel the next major leg of the decline.” Euro has now plunged more than 3.1% off the September highs with the bears rebounding off channel support last week at two-month lows. The risk remains tilted to the downside while within this formation with immediate focus on a breakout of the weekly opening-range for guidance in the days ahead.

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 proposed descending pitchfork extending off the yearly highs with price rebounding off the lower parallels last week. Weekly-open resistance is eyed at 1.1625 and is backed closely by the September 25 swing low at 1.1645. Near-term bearish invalidation is now lowered to the 38.2% retracement of the September sell-off at 1.1686- note that the upper parallel converges on this threshold over the next few days and a break / close above this slope would be needed to suggest a more significant low is in place / a larger reversal is underway. Subsequent resistance eyed at the objective monthly open at 1.1733 and the 61.8% retracement at 1.1775.

Initial support rests with the October low-day close at 1.1565 with a break below the weekly opening-range exposing key support at the 100% extension of the September decline / April high-day close (HDC) at 1.1505/14- an area of interest for possible downside exhaustion/ price inflection IF reached. Subsequent support seen at the May HDC / August low at 1.1386/92.

Bottom line: A rebound off downtrend support keeps the focus on a breakout of the weekly opening-range for guidance here. From a trading standpoint, rallies should be limited to 1.1686 IF price is heading lower on this stretch with a break below the 1.15-handle needed to fuel the next major leg of this decline.

Note that markets will be closely monitoring the escalating China trade dispute as concerns mount about President Xi’s move to restrict exports of rare earth minerals and magnets. We also get the releases of key inflation data next week from the Eurozone and the U.S. next week – stay nimble here and watch the weekly closes 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.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on Twitter @MBForex