EUR/USD TECHNICAL ANALYSIS: BEARISH
- Euro break of 4-month support sets the stage for downtrend resumption
- Initial support at 1.0968, breakdown may expose October swing bottom
- Close above 1.1149 probably needed to offset near-term selling pressure
The Euro has broken support guiding its recovery against the US Dollar since the beginning of October. That paints the rise as corrective within the context of longer-term downtrend that has now apparently resumed. The reversal has been in the making since the beginning of the year, following in the wake of a false breakout above the 1.12 figure (as expected).
From here, the next layer of immediate support lines up in the 1.0968-90 congestion region. A break below that confirmed on a daily closing basis probably opens the door to a challenge of October’s swing bottom at 1.0879. Neutralizing immediate selling pressure likely requires a reversal to close above downward-sloping resistance set from the December 31 high, as well as the inflection point at 1.1149.
EUR/USD daily chart created with TradingView
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Measuring the depth of prior downswings within the current trend – in play since mid-2018 – produces an average decline of 4.6 percent. A repeat of these trading patterns here would imply a move lower that puts EUR/USD just above the 1.07 figure. That would amount to the lowest level since April 2017. Naturally, immediately prevailing market conditions might still dictate a larger or smaller move.
EUR/USD weekly chart created with TradingView
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— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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