Euro Short-term Outlook: EUR/USD Threatens July Downtrend

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

• Euro bears exhaust into downtrend support on momentum strong divergence
• EUR/USD recovery now approaching downtrend resistance- risk for price inflection
• Resistance 1.0643, 1.0704, 1.0765- Support 1.0519, 1.0483, 1.0340-1.0405 (key)

Euro is attempting a second weekly rally on the back of an eleven week decline with EUR/USD building on a rebound off downtrend support. The recovery is within striking distance of technical resistance and the battle lines are drawn for the bears. 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 EUR/USD  had broken multi-month support and that, “rallies should be limited to the 1.0843 IF price is heading lower on this stretch with a close below 1.07 needed to fuel the next leg lower.” Euro broke through support the following day with price plunging more than 2.6% into the October open. A rebound off downtrend support last week has rallied nearly 1.6% off the lows and the focus is on this stretch into technical downtrend resistance.

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 with the advance now approaching confluent resistance around 1.0643/44 – a region defined by the 23.6% Fibonacci retracement of the yearly-range and the January low-day close. A breach / daily close above this threshold would be needed to validate a breakout of the July downtrend with such a scenario exposing the yearly open at 1.0705 and the 38.2% retracement at 1.0765- look for a larger reaction there IF reached.

Initial support rests with the weekly opening-range lows at 1.0519 and is backed closely by the January low at 1.0483- a close below this threshold is needed to mark resumption of the broader downtrend towards key support at the 2017 low-day close / low around 1.0340-1.0405- an area of interest for possible downside exhaustion / price inflection IF reached.

Bottom line: Euro has rebounded off channel support and is now within striking distance of downtrend resistance. From at trading standpoint, the rally should be capped by 1.0643 IF price is heading lower with a close below 1.0483 needed to mark resumption.

Note that Euro failed to hold a break below the yearly opening-range lows last week with the October opening-range now being challenged. A topside breach could fuel an accelerated recovery and would suggest a more significant low was registered last month- stay nimble here. 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, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex