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EUR/USD Technical Analysis: Euro Soars as Global Markets Crumble

EUR/USD TECHNICAL ANALYSIS: NEUTRAL

  • Euro soars to 13-month month high against the US Dollar
  • Downtrend from 2018 broken, key resistance near 1.14 mark
  • Short-term positioning hints a pullback may be in the cards

The Euro soared the highest level in 13 months against the US Dollar as breakneck liquidation gripped financial markets at the start of the trading week. The surge extends an expected recovery from a three-year low that took out the early-2020 downtrend last week.

Prices are now testing resistance in the 1.1412-19 area, marked by the June 2019 swing top and the 61.8% Fibonacci retracement of the EUR/USD downtrend from September 2018. Breaking above that on a daily closing basis probably opens the door for a test of the 78.6% level at 1.1593.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

Immediate support appears to be at 1.1297, the 50% Fib. A turn back below that with confirmation of a breach – again, on a daily closing basis – initially eyes former resistance at 1.1239 (December 31 high). This is followed by the 38.2% retracement at 1.1174.

In fact, negative RSI divergence on the four-hour chart warns that the move higher may be losing strength however, opening the door for a pullback. Neutralizing near-term selling pressure in earnest probably calls for a breach of rising trend support guiding recent gains, now effectively at the 1.12 figure.

Euro vs US Dollar price chart - 4 hour chart

EUR/USD 4-hour chart created with TradingView

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EUR/USD TRADER SENTIMENT

Chart of Euro vs US Dollar exchange rate, retail trader sentiment

Retail positioning data shows 69.37% of traders are net-short, with the short-to-long ratio at 2.27 to 1. IG Client Sentiment(IGCS) is typically used as a contrarian indicator, sothe net-shortskew in traderspositioning suggests that EUR/USD may continue to rise.

However, the number of traders net-short is 9.47% lower than in the prior session despite being 39.67% higher compared with a week before. The net-long tally is 5.04% lower than yesterday and 25.55% lower relative tothe preceding week. On balance, this makes for a clouded sentiment-based outlook.

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