Euro Technical Forecast: EUR/USD Reversal Rally Faces Its First Major Hurdle

Euro Technical Forecast: EUR/USD Weekly Trade Levels

EUR/USD has rallied more than 2% from the yearly low after last week's outside-week reversal.
The recovery is now confronting it’s the first technical hurdle since breaking out of the July range.
Weekly momentum is attempting to confirm a broader shift after diverging into the yearly low.
Holding above the July breakout zone would reinforce the recovery, larger test of yearly downtrend is eyed just higher.
Resistance 1.1578, 1.1639/49 (key), 1.1746/75- Support 1.1469/83, 1.1355/94 (key), 1.1228

EUR/USD has extended its recovery from the yearly low after last week's outside-week reversal triggered a decisive breakout from the July consolidation range. The rally has now reached the first major resistance zone since the June decline began, making this an important test of whether buyers can sustain the improving technical backdrop. With weekly momentum showing signs of turning higher and key U.S. inflation data on tap next week, traders will be watching closely for confirmation on whether this recovery has room to develop into a broader trend reversal. Battle lines drawn on the EUR/USD weekly technical chart.

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Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Technical Outlook: In last month’s Euro Technical Forecast we noted that the July opening range was set just above pivotal support and that, “From a trading standpoint, the April downtrend remains intact while below 1.1649, but the bears are vulnerable while above 1.1355.” EUR/USD spent more than five-weeks coiling within the July range before breaking out into the close of the month. An outside weekly reversal off the lows last week has extended more than 2.2% off the yearly low with the rally now testing the first major resistance hurdle on the back of a weaker than expected US employment report.

EUR/USD Weekly RSI

The immediate focus is on the weekly close with respect to the January low at 1.1578. Note that weekly momentum has is attempting to break above 50 for the first time since May after marking divergence into the yearly low. A momentum trigger extending off the 2025 high-close remains in place and may offer further guidance in the weeks ahead.

Initial weekly support now rests at the July breakout zone near 1.1469/83 with key support steady at 1.1355/65- a region defined by the 38.2% retracement of the 2025 advance and the April high-week close. The median-line of the broader 2022 uptrend converges on this level and a break / weekly close below would be needed to fuel the next major leg of the January downtrend. Subsequent support rests at the 2026 high close at 1.1228 and 1.1110/64.

A confirmed breakout from here exposes the next major resistance zone at the 61.8% retracement of the April decline and the 52-week moving average at 1.1639/49. Note that the 61.8% parallel converges on this threshold next week and strength beyond this slope would suggest a more significant low was registered in June. Ultimately a breach above the 1.1745/75 is needed to invalidate the yearly downtrend and put the bulls back in control.

Bottom line: EUR/USD rebounded off major support last week with the recovery now testing the first technical hurdle. From a trading standpoint, a good level to reduce portions of long-exposure / raise protective stop- losses would need to be limited to the 1.1469 IF price is heading higher on this stretch. Look for a larger reaction near 1.1650 IF reached.

Today's weaker-than-expected Non-Farm Payrolls report prompted markets to scale back expectations for a September rate hike, with Fed funds futures now implying a 56% probability the Fed leaves policy unchanged next month. The focus now shifts to Wednesday's CPI report, which will provide the next major test for the inflation outlook. With labor market conditions showing signs of moderation, softer inflation data would reinforce the case for a less restrictive policy path, reducing the dollar's yield advantage and supporting the euro's recovery. Stay nimble into the release and watch the weekly close for guidance. Review my latest Euro Short-term Outlook for a closer look at the near-term EUR/USD technical trade levels.

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--- Written by Michael Boutros, Senior Technical Strategist

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