Euro Talking Points:
- It was a fast sell-off in the single currency in the month of May but June is starting out in a very different way with bulls making a strong showing on the first trading day of June.
- Tomorrow brings the Non-farm Payrolls report and today has seen broad-based USD weakness. Will tomorrow’s jobs report bring USD bulls back to the table?
- I’ll be discussing these themes in-depth in the weekly webinar on Tuesday at 1PM ET. It’s free for all to register: Click here to register.
It was a hard fall for the Euro in the month of May. The EUR/USD pair had put in a strong trend from the middle of March and into April, eventually re-testing a major zone of resistance around the 1.1000 handle.
That resistance stalled the advance and it held for almost a full month, with sellers starting to take a harder swing at the matter when EUR/USD broke below the 1.0943 Fibonacci level on May 11th.
The primary complication with that trend was how quickly the sell-off came in and the fact that there was little pullback along the way. This helped EUR/USD to work into a falling wedge formation which is emblematic of sellers showing a strong response at resistance while being a bit more passive around support.
Well, yesterday saw sellers take their shot in early trade, helping to craft a fresh two-month low in the pair at 1.0635. But bears couldn’t hold the move, and a late-session reversal left yesterday’s daily bar with a wide wick sitting below price. That bullish action that showed up late on the final day of May has so far continued through the first day of June, with EUR/USD making a beeline for resistance at the 1.0747-1.0760 zone, with a few other notable levels nearby that I had mentioned in the Tuesday webinar.
EUR/USD Four-Hour Price ChartChart prepared by James Stanley, EUR/USD on Tradingview
EUR/USD Pullback or Reversal
At this stage we have a day and a half of strength after what was a consistent sell-off through most of May. So, it would be too early to say that the trend has turned but tomorrow brings a major driver with the Non-farm Payrolls report out of the United States and this presents the opportunity for more evidence on the matter.
From the daily chart, we can get a bit more perspective on the current technical backdrop around EUR/USD, with resistance at 1.0787 and 1.0845 sitting overhead. Above that, the 1.0900 level was a quick swing-low-turned-resistance that remains of interest; but it’s the 1.0943 level that’s of interest, as this was a Fibonacci level that held multiple inflections of support before giving way. And, as of yet, it hasn’t been tested for resistance.
If buyers can drive up to that level with a show of resistance at that price, inside of the 1.1000 handle, that could present a compelling scenario for bears.
EUR/USD Daily Price ChartChart prepared by James Stanley, EUR/USD on Tradingview
EUR/USD Big Picture
Taking a step back to the weekly chart and EUR/USD remains in the same range that’s been in-play for all of 2023 trade so far. Key support has been around the 1.0500 handle which has held two separate inflections so far in 2023 trade, and resistance has remained around that key zone near the 1.1000 level, with the 2023 high thus far printing at 1.1096.
This could set the stage for larger-picture trend scenarios on an eventual break of either of those regions. But, until a break on either side of this mean reversion actually happens, traders should remain cautious with trending or breakout scenarios.
EUR/USD Weekly Price ChartChart prepared by James Stanley, EUR/USD on Tradingview
--- written by James Stanley, Senior Strategist
To follow James on Twitter, he’s @JStanleyFX