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EUR/USD Technical Analysis: Euro Down to 4-Month Low. Now What?

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro sinks to 4-month range floor after breaking support below 1.10
  • Long-term positioning hints a decline toward 1.07 may be in progress
  • Client sentiment studies bolster the argument for a bearish scenario

The Euro punctured support in the 1.0968-90 area, extending downward to hit the lowest level in four months against the US Dollar. Sellers now target the October 1 low at 1.0879. A break below that confirmed on a daily closing basis may set the stage for a challenge of the 1.08 figure.

Alternatively, a move back above 1.0990 opens the door for a retest of the falling trendline guiding EUR/USD lower since the beginning of the year. This is reinforced by a dense cluster of overlapping resistance levels running up to 1.1150, with a close above that probably needed to neutralize near-term selling pressure.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

Zooming out to the weekly chart suggests prices are building out the next leg lower in a downtrend defining EUR/USD price action since mid-2018. Averaging the depth of prior pullbacks yields a baseline drawdown of 4.6 percent. Such a move from the latest swing high would out the pair just above the 1.07 mark.

EUR/USD Technical Analysis: Euro Down to 4-Month Low. Now What?

EUR/USD weekly chart created with TradingView

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EUR/USD TRADER SENTIMENT

Euro vs US Dollar price chart, retail trader sentiment

Retail trader data shows 74.07% of traders are net-long with the ratio of traders long to short at 2.86 to 1. The number of traders net-long is 8.19% higher than yesterday and 41.84% higher from last week, while the number of traders net-short is 1.24% higher than yesterday and 32.37% lower from last week.

IG Client Sentiment(IGCS) is typically used as a contrarian indicator, and traders being net-long suggests EUR/USD may continue to fall. They are more net-long than yesterday and relative to last week, which points to a stronger EUR/USD-bearish contrarian trading bias.

See the full IGCS sentiment report here.

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EUR/USD TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter