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EUR/USD Technical Analysis: Euro Rebound May Soon Fizzle

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro bounces vs US Dollar but gains appear to be corrective
  • Four-hour chart reveals prices capped by monthly downtrend
  • Trader sentiment studies point to firming bearish trend bias

The Euro has launched a tepid recovery against the US Dollar, as expected. Prices pulled up from support at 1.0652, the 78.6% Fibonacci expansion, to challenge former support in the 1.0783-1.0880 zone. This barrier is reinforced by the 61.8% level at 1.0832.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

Thus far, the rally appears to be corrective within the context of a broader descent. Indeed, zooming into the four-hour chart reveals EUR/USD remains conspicuously capped by falling trend line resistance defining the descent since the beginning of the month.

Neutralizing near-term selling pressure probably demands a convincing break above this barrier. In this scenario, prices may open the door for a move to challenge support-turned-resistance just below the 1.10 figure. Alternatively, slipping below countertrend support may clear the way back below 1.07.

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

Retail positioning data shows 57.28% of traders are net-long, with the long-to-short ratio at 1.34 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, so the net-long skew in tradersexposure suggests that EUR/USD is likely to trend downward.

Furthermore, the number of traders net-long is 21.89% higher than yesterday and 33.98% higher from last week.The net-short tally is 6.53% lower than the prior session and 11.26% from a week before. Taken together, recent changes in positioning make for a stronger sentiment-derived bearish signal.

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