Euro Short-term Outlook: EUR/USD Bears Lose Steam into October Close

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

• Euro snaps three-day losing streak- monthly decline responds to trend support
• EUR/USD threatens bear-market recovery- broader outlook remains tilted to the downside
• US Core PCE, NFP, US elections, and FOMC rate decision on tap over next two weeks
• Resistance 1.0835, 1.0871/79 (key), 1.0934/47- Support 1.08, 1.0761, 1.0732 (key)

The Euro plunged more than 4% off the yearly highs with a four-week sell-off responding to technical support yesterday. While the broader technical outlook remains weighted to the downside, the immediate decline may be at risk heading into the monthly cross and the battle lines are drawn for the EUR/USD bears. These are the update targets and invalidation levels that matter on the Euro short-term technical charts into the close of October.

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 was, “approaching a major pivot zone at 1.0871/79- a region defined by the 1.618% extension of the September range, the 200-day moving average and the June high-day close (HDC). Risk for possible exhaustion / price inflection off this zone over the next few days.” Euro broke lower the following day with the subsequent decline extending more than 3.3% from the monthly open.

Price rebounded off slope support this week at the confluence of the late-September downtrend (blue) and the April uptrend (purple). The focus is on this recovery into the close of the month with the broader outlook still weighted to the downside while within this pitchfork formation.

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 rebounding off the lower parallel this week with the recovery now attempting to mount the 61.8% retracement of the yearly range at 1.0835. Resistance is now eyed at 1.0871/79 and is backed by the 38.2% retracement of the recent decline / March high close / July high at 1.0934/47. Ultimately, a breach / close above the 1.10-handle (bearish invalidation) would be needed to suggest a more significant low is in place / larger trend reversal is underway.

Look for initial support near the 1.08-handle with subsequent objectives seen at the weekly lows (1.0761) and the lower parallel / 78.6% retracement at 1.0732- and area of interest for possible downside exhaustion / price inflection IF reached. Subsequent support seen at 1.0681 and the yearly low-day close (LDC) at 1.0619.

Bottom line: The Euro sell-off has responded to downtrend support and the leaves the immediate recovery vulnerable into the close of the month. From a trading standpoint, a good region to reduce portions of short-exposure / lower protective stops- rallies should be limited to this week’s high / the median-line IF price is heading lower on this stretch with a close below 1.0732 needed to fuel the next major leg.

Keep in mind we have key inflation data on tap next week with US Non-Farm Payrolls released into the November-open on Friday. Note that NFPs, US elections, and the FOMC interest rate decision over the next two weeks represent major event risk for the USD crosses- 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

• US Dollar Short-term Outlook: USD Bulls Relent at Resistance
• Australian Dollar Short-term Outlook: AUD/USD Bears Charge 6600
• Canadian Dollar Short-term Outlook: USD/CAD at Resistance- BoC on Tap
• Gold Short-term Outlook: XAU/USD October Range Breakout Imminent
• British Pound Short-term Outlook: GBP/USD Support Test at September Low

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

Follow Michael on Twitter @MBForex