Euro Short-term Outlook: EUR/USD Poised for Breakout Ahead of Fed/ECB

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

• EUR/USD in consolidation within the October range, September downtrend remains intact
• Euro immediate focus is on breakout of weekly range to offer near-term direction.
• Major event risk ahead with the FOMC / ECB interest rate decisions & U.S. Q3 GDP to drive volatility into the monthly cross.
• Resistance 1.1625, 1.1675/86 (key), 1.1734- Support 1.1582, 1.1542, 1.1505/14 (key)

The Euro is consolidating within the monthly range after a modest late-week recovery, with EUR/USD poised for a breakout ahead of next week’s key central bank decisions. Despite near-term stability, the broader outlook remains tilted to the downside while within the September downtrend.  Major event risk next week could trigger significant volatility and determine the next directional move for the Euro into the monthly close. 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 my last Euro Short-term Technical Outlook we noted that EUR/USD had rebounded off downtrend support and that, “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.” Euro briefly registered an intraday high at 1.1728 three-days later but failed to close above 1.1686. The subsequent decline extended nearly 1.3% off those highs and despite a late-week recovery, EUR/USD remains within the September channel. The focus now shifts to a breakout of this contractionary range to dictate price direction into the monthly crossover.

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 descending pitchfork extending off the yearly high. A rebound off the median-line shifts the focus to a breakout of last week’s range for guidance. Initial support rests with the 78.6% retracement at 1.1582 and is backed by the objective October low at 1.1542. Ultimately, a break / close below the 100% extension of the September decline / April high-day close (HDC) at 1.1505/14 would be needed to mark downtrend resumption. Note that losses below this threshold could fuel another accelerated decline with the next major technical consideration eyed at the lower parallel / May HDC / August low at 1.1386/91- look for a larger reaction there IF reached.  

Initial resistance is eyed at the 10/17 reversal close at 1.1653 and is backed closely by last week’s high / 38.2% retracement of the September decline at 1.1675/86. A break / daily close above this threshold would be needed to suggest a more significant low is in place / a larger trend reversal is underway (near-term bearish invalidation). Subsequent resistance objectives are eyed at the October open at 1.1734 and is backed by the 61.8% retracement at 1.1775 (area of interest for possible topside exhaustion / price inflection IF reached).

Bottom line: EUR/USD is in consolidation within the October range with major event risk on tap next week. The immediate focus is on a breakout of the 1.1582-1.1686 range for guidance with the outlook still weighted to the downside while within this formation. From a trading standpoint, rallies need to be limited to last week’s high IF price is heading lower on this stretch with a close below 1.15 ultimately needed to fuel the next major leg of this decline.

The Fed widely expected to cut interest rates by 25bps points next week with no change expected from the ECB. As always, traders will be focused on the accompanying statement / presser for further guidance on the path of interest rates heading into the close of the year. Stay nimble into the releases and watch the weekly closes for guidance here. 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