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EUR/USD Technical Analysis: Euro Hopes for Lifeline at 3-Year Low

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro sinks through 3-year support, probing below 1.07 figure
  • Bounce above 1.10 needed to neutralize near-term bearish bias
  • Trader sentiment studies bolster the case for Euro weakness

The Euro swiftly banished hopes for a rebound that briefly flashing on the daily chart mid-week, accelerating downward against the US Dollar to puncture three-year support in the 1.0783-1.0880 area. That put prices squarely atop the 78.6% Fibonacci expansion at 1.0652. Breaking below this barrier on a daily closing basis may open the way for a challenge of the 100% Fib at 1.0422.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

Turning to the 4-hour chart offers a glimpse of what might happen were EUR/USD to attempt recovery. Resistance begins in the 1.0777-84 zone, followed by a minor inflection point at 1.0848. A break of downward-sloping trend resistance is probably a prerequisite for neutralizing immediate selling pressure however. Doing that would require prices to extend north of the 1.10 figure.

Euro vs US Dollar price chart - 4 hour

EUR/USD 4-hour chart created with TradingView

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EUR/USD TRADER SENTIMENT

Euro vs US Dollar price, trader sentiment chart

Retail positioning data shows 56.19% of traders are net-long, with the long-to-short ratio at 1.28 to 1. IG Client Sentiment(IGCS) is typically used as a contrarian indicator, sothe net-longskew in tradersexposure suggests that EUR/USD is biased downward.

The number of traders net-long is 12.27% higher than yesterday and 52.67% higher from last week.The net-short tally is down 11.53% from yesterday and 30.31% lower compared with a week before. On balance, this speaks to strengthening conviction in bearish follow-through.

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