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EUR/USD Technical Analysis: Euro Downtrend May Be Back in Play

EUR/USD TECHNICAL ANALYSIS: BEARISH

  • Euro breaks rising trend line support, hints downtrend vs USD resuming
  • Confirmation on a daily close below 1.0783 may expose late-March low
  • Trader sentiment studies seem to bolster the case for a bearish scenario

The Euro has pushed through counter-trend support guiding its upswing from late-March lows, hinting that recent congestion may be resolved to the downside. A daily close below 1.0783, the underside of a three-year price inflection zone, looks likely to pave the way for a retest of the 2020 swing low at 1.0636.

Euro vs US Dollar price chart - daily

EUR/USD daily chart created with TradingView

Zooming in to the 4-hour chart for a sense of more immediate levels, it now looks as through prices have cleared congestion range support just above the 1.08 figure, exposing the early-April swing bottom. Clearing that barrier seemingly leaves the door open to extend down to challenge the March floor.

Alternatively, a bounce back above support-turned-resistance in the 1.0810-15 region might set the stage to probe the 1.0901-19 inflection region once again. Establishing a foothold back above this barrier is probably a prerequisite for neutralizing near-term selling pressure.

EUR/USD Technical Analysis: Euro Downtrend May Be Back in Play

EUR/USD 4-hour chart created with TradingView

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EUR/USD TRADER SENTIMENT

Retail positioning data shows 56.29% of traders are net-long, with the long-to-short ratio at 1.29 to 1. IG Client Sentiment(IGCS) is typically used as a contrarian indicator, sothe net-long skew in tradersexposure suggests that EUR/USD is biased downward.

In fact, the number of traders net-long is 23.75% higher than yesterday and 33.56% higher from last week. That makes for a deepening sentiment tilt toward the long side, which bolsters confidence in the strength of the bearish-contrarian signal.

Euro vs US Dollar exchange rate, trader sentiment

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