Euro Short-term Technical Outlook: EUR/USD Threatens Correction

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

• Euro exhausts into trend resistance- risk for deeper correction within broader uptrend
• EUR/USD remains constructive while above yearly open- PCE on tap into monthly close
• Resistance 1.1191, 1.1228, 1.1274/92- Support 1.1105, 1.1038/60 (key), 1.10

The Euro is poised to snap a four-week winning streak with EUR/USD off more than 0.8% from the yearly high. Price has now responded to uptrend resistance and threatens a deeper pullback while below this weeks’ open. Battle lines drawn on the EUR/USD short-term technical charts heading into key US inflation data and the close of the month.

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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 my last EUR/USD Short-term Technical Outlook we noted that the Euro rally was testing a major pivot zone and that, “a close above 1.1060 is needed to keep the bulls in control towards the December highs.” Prices ripped higher three-days later with EUR/USD rallying nearly 3.9% off the August lows to fresh yearly highs.

The rally failed to breach the upper bounds of the ascending pitchfork formation we’ve been tracking off the June lows with Euro off more than 0.8% from the high. The immediate focus is on this pivot zone near the December high-close at 1.1105 and although broader outlook remains constructive, weakness below this threshold could fuel a deeper pullback within the multi-month uptrend.

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 reversing off the upper parallels with today’s pullback responding to initial support here at 1.1105. A break below this threshold zone would invalidate the August uptrend (red) and threaten a test of longer-term trend support at the next major technical confluence around 1.1038/60- a region defined by the objective 2024 yearly open and the December high-day close (HDC). Note that the median-line converges on this zone into the start of September and a break / close below would be needed to suggest a more significant high was registered this week.

Weekly-open resistance is eyed at 1.1191 with a breach / close above the 2023 high-day close (HDC) at 1.1228 needed to mark uptrend resumption. The next major technical confluence is eyed at 1.1278/92- a region defined by the 61.8% Fibonacci retracement of the 2021 decline and the 100% extension of the 2023 advance. Look for a larger reaction there IF reached.

Bottom line: Euro has turned from uptrend resistance with the pullback now testing initial uptrend support- we’re on the lookout for a possible exhaustion low on this pullback in the days ahead. From a trading standpoint, the threat remains for deeper pullback while below the weekly open- losses should be limited to 1.1038 IF price is heading higher on this stretch with a close above 1.1228 needed to fuel the next leg in price.

Keep in mind we are heading into the close of the month with US Personal Consumption Expenditure (PCE) data on tap ahead of an extended holiday weekend. Watch the weekly close here and stay nimble into the monthly cross. 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