Euro Technical Forecast: EUR/USD Checks Support of ECB

Euro Technical Forecast: EUR/USD Weekly Trade Levels

• Euro off more than 1.2% in January– responding to confluent support this week
• EUR/USD risk for price inflection heading into ECB interest rate decision, US PCE
• Resistance 1.1018/38, 1.1108, 1.1228/75– Support ~1.0824, 1.0704/12, 1.0587

Euro plunged more than 2.8% off the January highs against the US Dollar with EUR/USD rebounding this week off technical support. The focus is on this near-term recovery with the broader threat still weighted to the downside while below the objective yearly-open. These are the updated targets and invalidation levels that matter on the EUR/USD weekly technical chart.

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Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Technical Strategist; EUR/USD on TradingView

Technical Outlook: In last month’s Euro Technical Forecast, we noted that Euro was testing resistance at, “the 61.8% Fibonacci retracement of the yearly range at 1.0960 – a breach / weekly close above this threshold is needed to keep the long-bias viable towards the 2023 high-week close at 1.1108.” Euro ripped higher later that week with price briefly registering an intraday-week high at 1.1139 before turning. EUR/USD plunged nearly 2.9% off the December highs into the January open with price rebounding off confluent support this week at the 52-week moving average at ~1.0824.

The immediate focus is on this recovery with the first technical consideration eyed at 1.1018/38- a region defined by the 61.8% retracement oft eh December sell-off, the December high-week close (HWC), and the objective 2024 yearly-open. A breach / weekly-close above this threshold is needed to mark resumption of the October uptrend towards subsequent objectives at the 2023 HWC at 1.1108 and critical resistance at 1.1228/75.

A break below this week’s low would threaten a larger correction towards key support at the 2023 yearly-open / 61.8% retracement of the October rally at 1.0704/12 (look for a larger reaction there IF reached)- losses should be limited to this pivot zone for the multi-month uptrend to remain viable (bullish invalidation). Subsequent support eyed at the 2023 low-week close (LWC) at 1.0587.

Bottom line: Euro has rebounded off uptrend support / the 52-week moving average and the focus is on this recovery with the medium-term risk still weighted to the downside while below multi-year downtrend resistance (blue pitchfork). From a trading standpoint, look for an exhaustion high on a stretch towards 1.1018/38 IF reached – ultimately, we are on the lookout for a more significant washout / exhaustion low in the weeks ahead. Keep in mind the European Central Bank (ECB) interest rate decision is on tap tomorrow with key US inflation data (PCE) on Friday- watch the weekly close here. Review my latest Euro Short-term Technical Outlook for a closer look at the near-term EUR/USD trade levels.

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

Follow Michael on X @MBForex