Euro Short-term Outlook: EUR/USD Poised to Snap Six-Week Selloff

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

• Euro poised to snap six-week losing streak- rebounds of key technical support
• EUR/USD January opening-range break imminent- U.S. Retail Sales, Presidential Inauguration on tap
• Resistance 1.0354, 1.0406/48 (key), 1.0587-1.0602- Support 1.0245, 1.0198-1.0205 (key), 1.01

Euro rebounded off key support on Monday with today’s post-CPI rally extending more than 1.7% off the weekly lows. The advance faltered at the objective yearly open, and the immediate focus now shifts to a breakout of the January opening-range for guidance with bears vulnerable while above the weekly lows. Battle lines drawn on the Euro short-term technical charts ahead of the extended holiday weekend.

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 monthly low with the December opening-range intact heading into the close of the week… rallies should be limited to 1.06 IF price is heading lower on this stretch with a close below 1.0446 needed to fuel the next leg of the decline.” Euro briefly registered an intraday high at 1.0535 before reversing with a break of key support four-days later fueling a decline of more than 4.2% off the December high.

The selloff rebounded off confluent support into the start of the week at 1.0198-1.0205- a region defined by the 1.618% extension of the September decline, the September 2022 swing high, the 61.8% retracement of the 2022 advance and the 1.618% extension of the September decline. Note that the lower parallel of the adjusted pitchfork also converges on this threshold and further highlights the technical significance of this region over the next few days- looking for a larger reaction off this mark.

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 an embedded descending channel of the same slope with today’s CPI rebound testing resistance at the objective 2025 yearly open at 1.0354. Ultimately, a topside breach / close above the 2017 low-day close (LDC) / October 2023 low at 1.0406/48 would be needed to suggest a more significant low was registered this week / a larger trend reversal is underway. The next major technical consideration on the topside is the 2023 low-week close (LWC) / April low at 1.0587-1.0602- look for a larger reaction there IF reached.

Weekly open support rests at 1.0245 and is backed by key support at the 1.02-handle. A break / close below this slope would threaten another bout of accelerated Euro losses with subsequent support objectives eyed at the 1.01-hand and Parity (1.00)- both levels of interest for possible exhaustion / price inflection IF reached.

Bottom line: Euro rebounded off confluent downtrend support this week, and the broader short-bias may be vulnerable near-term while above. From at trading standpoint, the immediate focus is on a breakout of the 1.02-1.0354 range for guidance- rallies should ultimately be limited to the 1.0448 IF price is heading lower on this stretch with a close below 1.02 needed to mark trend resumption.

Keep in mind we get the release of U.S. retail sales data into the close of an extended holiday weekend with the Inauguration of President Trump on tap Monday. The administration is likely to make sweeping executive actions on day-one and markets are likely to be quite reactive in the days ahead. 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.

Active Short-term Technical Charts

• Canadian Dollar Short-term Outlook: USD/CAD Breakout Imminent
• Swiss Franc Short-term Outlook: USD/CHF Bulls Eye the Break
• British Pound Short-term Outlook: GBP/USD Bears Slams into Support
• Gold Short-term Outlook: XAU/USD Poised for Breakout
• US Dollar Short-term Outlook: USD Bulls Rest After Five-Week Run
• Australian Dollar Short-term Outlook: AUD/USD Bears Lay in Wait
• Japanese Yen Short-term Outlook: USD/JPY Recovery at Trend Resistance

--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex