Euro Short-term Technical Outlook: EUR/USD Bear Market Rally Underway

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

• Euro rebounds off downtrend support at yearly lows – rally approaching trend resistance
• EUR/USD recovery may be vulnerable into key event risk / monthly cross – PCE, FOMC, NFP on tap
• Resistance 1.0754, 1.0792-1.0809, 1.0933/39- Support 1.0654, 1.0619, 1.0587/96 (key)

Euro is trading higher for a second consecutive week with EUR/USD building on a rebound off downtrend support. The focus is on this recovery towards trend resistance and the recent rally may be vulnerable into major event risk over the next few days. These are the updated targets and invalidation levels that matter on the Euro short-term technical heading into the May open.

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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 EUR/USD Short-term Technical Outlook we noted that Euro had reversed off technical resistance and that, “From a trading standpoint, look to reduce portions of short-exposure on a stretch towards 1.0795– rallies would need to be limited to the March high-day close IF price is heading lower.” Price briefly registered a low at 1.0742 into the April open before rebounding with the recovery faltering well ahead of the March HDC – the subsequent sell off extended more than 3.4% off the March highs before rebounding off downtrend support last week.

The focus is on this recovery with EUR/USD attempting to breach a major inflection zone today at 1.0704/12 – a region defined by the objective e 2023 yearly open, the 61.8% Fibonacci retracement of the October rally, and the February close-low. A weekly close above this threshold would be needed suggest a larger bear-market recovery is underway- US core PCE is on tap tomorrow with the Fed on deck.

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 formation extending off the March high. A breach above the median-line early in the week keeps the focus on a possible stretch towards trend resistance before resumption.

Topside hurdles eyed at the 1.618% extension at 1.30754 and the objective monthly open / 38.2% retracement / 200-day moving average at 1.0792-1.0809- both levels of interest for possible topside exhaustion / price inflection IF reached. Ultimately, a breach / close above the upper parallel would be needed to invalidate the 2024 downtrend.

Initial support rests with the 61.8% retracement of the recent advance at 1.0654 and is backed by the objective 2024 low-day close (LDC) at 1.0618. Key support rests with the 2023.low-week close (LWC) / 78.6% retracement at 1.0587/96- a break / close below this threshold would be needed to mark resumption towards subsequent objectives at the 100% extension of the December decline at 1.0537 and the 2023 LDC at 1.0466.

Bottom line: A rebound off downtrend support is approaching trend resistance – looking for possible topside exhaustion in the days ahead. The immediate focus is on today’s close for guidance with respect to 1.0704/12. From a trading standpoint, rallies should be limited to the 200DMA IF price is heading lower on this stretch with a close below 1.0587 needed to mark downtrend resumption.

Keep in mind that we have major event risk on tap into the monthly cross with key inflation data tomorrow giving way to the FOMC interest rate decision and US non-farm payrolls next week. Stay nimble into the May opening-range 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, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex