Euro Short-term Outlook: EUR/USD Trapped in Downtrend- Breakout Risk Brewing

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

• EUR/USD has pulled back more than 1.6% from the December highs, with price remaining confined within a multi-week downtrend
• Weekly opening-range is set just below resistance- A break above the upper bounds is needed to invalidate the current downtrend, while failure here keeps downside pressure intact into more significant support.
• Resistance 1.1691-1.1703 (key), 1.1735/46, 1.1794-1.1813- Support 1.1634, 1.1590/98 (key), 1.1542

The Euro remains under pressure after a two-week decline from the December highs, with EUR/USD trading within the confines of a well-defined near-term downtrend. The weekly opening-range is carved just below downtrend resistance and now serves as a near-term pivot for price action. The focus is on whether the pair can break out of this range to signal a trend shift, or if the downtrend remains in control and drives price toward more significant technical support just lower. The reaction around this zone is likely to be decisive in determining direction for the Euro into the close of the month. Battle lines are drawn on the Euro short-term technical charts.

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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 the EUR/USD outlook remained, “constructive with the immediate focus on a reaction into near-term uptrend resistance. From a trading standpoint, losses should be limited to 1.1679 IF price is heading higher on this stretch with a close above 1.1747 needed to fuel the next leg of the advance.” The rally continued in the following days with price registering an intraday high at 1.1808 on Christmas Eve before reversing off confluent resistance at 1.1794/.1813- a region defined by the 1.618% extension of the November advance and the 2025 high-day close (HDC).

The pullback has now extended more than 1.6% off the December high with the weekly opening-range set just above the November HDC at 1.1634. Look for a breakout here in the days ahead to offer guidance with the multi-week downtrend still in play while below the 1.17-handle.

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 trading within the confines of a descending pitchfork extending off the December high. Resistance is eyed at the 38.2% retracement of the recent decline and the mid-December swing lows at 1.1691-1.1703- note that the upper parallel converges on this threshold over the next few sessions and a topside breach / daily close above is needed to invalidate the multi-week downtrend in Euro. Subsequent resistance is eyed at the 61.8% retracement and the objective yearly open at 1.1735/46 with a breach above 1.1794-1.1813 still needed to mark resumption of the broader uptrend.  

A break below the median-line would expose the next key support zone at 1.1590/98- a region defined by the December low, the 100% extension of the late-December decline, and the 61.8% retracement of the November advance. Look for a larger reaction there IF reached with losses below the 200-Day moving average at (currently ~1.1577) needed to suggest a more significant correction is underway. The next major technical consideration rests with the November low-day close (LDC), and the March 2020 / 2022 highs at 1.1492/97.

 

Bottom line: Euro is trading within the confines of a near-term downtrend off the late-December high with the weekly opening-range carved just below downtrend resistance. From a trading standpoint, rallies would need to be limited to 1.1703 IF price is heading lower on this stretch with a close below the weekly open needed to fuel the next leg of the decline. Ultimately a larger setback here may offer more favorable opportunities closer to trend support.

Keep in mind the next major economic data release is slated for next week with Personal Consumption Expenditures (PCE) on tap Thursday. This is the Fed’s preferred inflationary gauge and will be critical in determining the timing of the central bank’s next rate cut. Stay nimble into the release and watch the weekly closes here 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.

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on Twitter @MBForex