Euro Short-term Outlook: EUR/USD Poised for August Breakout

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

• Euro plunges more than 3.1% from the yearly highs– August opening-range in focus
• EUR/USD four-week decline now testing trend support- shorts vulnerable
• Resistance 1.1041/51, 1.1095, 1.1137- support 1.0911/12, 1.0835, 1.08

Euro is poised to mark a fourth consecutive weekly decline with EUR/USD now testing multi-month trend support. While the threat for a deeper correction remains, the immediate focus is on a breakout of the objective monthly opening-range for guidance and the battle lines are drawn into the close of the week. These are the updated targets and invalidation levels that matter 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 an eight-day rally in EUR/USD was vulnerable and that, “the threat for broader topside exhaustion is real as price approaches a key resistance confluence here with the FOMC & ECB interest rate decisions on tap next week.” The region in focus was a, “key resistance confluence at the 61.8% Fibonacci retracement of the 2021 decline at 1.1275- note that a pair of uptrend resistance slopes also converge on this threshold over the next few days and further highlight the threat for possible price inflection here.”

Euro topped that day with price plunging more than 3.1% before rebounding off multi-month uptrend support into the open of August. The focus now falls to the monthly opening-range with EUR/USD contracting just above slope support- the breakout is imminent.

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 channel formation extending off the July high. A topside breach here would expose the monthly range highs / resistance at 1.1041/51- a region defined by the April high-day close / 38.2% retracement of the July decline. A breach / close above this threshold would be needed to validate a near-term reversal towards the April high at 1.1095 and the 61.8% retracement at 1.1137- look for a larger reaction there IF reached.

Initial support rests with the July open / August low at 1.0911/12- a break / close below this threshold would be needed to suggest a more significant high was registered last month. Subsequent support objectives eyed at the June low at 1.0835, the 1.08-handle (soft support), and the 200-day moving average (currently ~1.0761)- an area of interest for possible downside exhaustion / price inflection IF reached.

Bottom line: Euro is testing multi-month trend support here with the August opening-range taking shape just above. From a trading standpoint, the immediate focus is on a breakout of this consolidation pattern for guidance (1.0911-1.1051). From a trend standpoint, rallies should be limited to 1.1137 IF price is heading lower with a close below 1.09 needed to fuel the next leg. Review my latest Euro Weekly Technical Forecast for a closer look at the longer-term EUR/USD trade levels.

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

Follow Michael on Twitter @MBForex