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EUR/USD Technical Analysis: Euro Downtrend Back in Play

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro breaks upswing support, sets stage for bearish resumption
  • Prices eyeing support near 1.07 figure after hitting weekly low
  • Trader sentiment studies bolster the case for a bearish scenario

The Euro turned lower against the US Dollar after finding resistance below the 1.12 figure, as expected. Have now broken the bounds of the upswing carved out from late-March lows, painting it as corrective and suggesting that the broader downtrend started a month ago has resumed.

Prices are now testing the 38.2% Fibonacci expansion at 1.0818. A break below this barrier confirmed on a closing basis sees the next immediate support at 1.0716. However, the true test of sellers’ mettle is likely found at last month’s swing bottom in the 1.0633-52 zone. The 61.8% Fib at 1.0614 is reinforcement.

Neutralizing near-term selling pressure probably calls for a break of downward-sloping resistance set from the March 30 swing top. This hurdle is immediately followed by back-to-back upside barriers running all the way up toward the 1.12 figure. That makes challenging any attempt for a meaningful bullish reversal.

Euro vs US Dollar price chart - daily

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 51.6% of traders are net-short, with the long-to-short ratio at 1.07 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, sothe net-short skew in tradersexposure suggests that EUR/USD is biased upward.

However, traders are less short than they have been both in the prior session and compared with one week ago. Meanwhile, net-long exposure is up 27.78 percent from yesterday 26.61% on-week. This warns that the sentiment-based directional signal may flip to favor losses in the period ahead.

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