Euro Talking Points:
- EUR/USD spent almost a full month holding resistance at a key spot on the chart.
- The weekly bar from two weeks ago showed a decisive bearish response, and last week was continuation until support showed up just below 1.0800. Can sellers continue to drive a fresh bearish trend?
- 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.
Through most of April and the first week of May, EUR/USD was in an abnormally reserved position. The pair had spent much of Q1 with a general tinge of strength, as an early January pullback was quickly bid higher, leading to a fresh yearly high in EUR/USD in the first two weeks of Q2 trade.
But, it was around that time that a major zone of longer-term resistance had come into the picture and helped to stall the bullish advance. I had highlighted this area in late-March, before it started to stall buyers again, and that resistance zone helped to hold price over four consecutive weekly bars until sellers finally started to force a push-lower. That began in the week before last, specifically around Thursday and Friday price action, and in the following week (last week) sellers continued the move until bringing into the picture a support level as taken from prior resistance.
The high from last May is at 1.0787, and that’s since come back in to help hold the lows so far for this May. But – are sellers done already? Or is this a pause in a bigger picture bearish theme?
EUR/USD Weekly Price ChartChart prepared by James Stanley, EUR/USD on Tradingview
From the daily chart, we can see an extension of this bearish tendency as noted by the red trendline below. That trendline originates on Thursday, May 4th, which is notable as this was the European Central Bank’s prior rate decision, which happened the day after the FOMC rate decision earlier this month.
At that rate decision, like many recent ECB meetings, the European Central bank took on a very hawkish tone. What’s different is the fact that the Euro sold off after, so the market response wasn’t the show of strength that one might expect in response to a hawkish rate hike from the ECB. And since that meeting, there’ve been multiple iterations of hawkish ECB verbiage that’s seemingly failed to bring a positive impact to the single currency.
At this point, there remains continued bearish potential. The 1.0787 level is notable as near-term support, and there’s another batch of possible support around the 1.0750 level. This was a grouping of swing highs from March trade that hasn’t yet been tested for support as prices have started moving lower, although it was close to coming into play last Thursday.
Sellers pushing below that zone would create a fresh lower-low while keeping the bearish trend in working order. On the resistance side of the matter, the move over the past couple of weeks has been fairly one sided as there hasn’t been much pullback in the move, but a prior spot of support-turned resistance around the 1.0848 level remains of note. Above that, the 1.0942 level remains as a point of interest, as this price was tested for support multiple times before giving way to sellers. And above that, the 1.1000 level remains as a notable spot of potential resistance, which may even serve as a form of invalidation if buyers are able to re-engage above that level.
A breach of support in the 1.0750 area continues the bearish trend, and this opens the door for a re-test of a massive spot on the chart – the same that held sellers at bay in the first week of the year and came back into the equation in March, and that’s around the psychologically-important 1.0500 handle.
EUR/USD Daily ChartChart prepared by James Stanley, EUR/USD on Tradingview