Euro May Resume Downtrend vs US Dollar If Range Support Falls

EUR/USD TECHNICAL ANALYSIS: BEARISH

• Euro takes aim at range support after rejection near 1.10 figure
• Breakdown may imply resumption of the longer-term down trend
• Trader sentiment studies warn selling pressure may be cooling

The Euro recoiled from range resistance clustered near the 1.10 figure, sinking toward sideways band’s support in the 1.0768-78 zone. A daily close below this barrier would not only end a month of directionless drift but also double as a breach of rising counter-trend support from the March 23 swing low.

That may imply that the dominant, long-term downtrend has been re-engaged. A challenge of that very bottom at 1.0636 is likely to follow as the next step thereafter. Alternatively, a rebound that takes EUR/USD above the range top sees the next upside hurdle at 1.1147, the March 27 high.

EUR/USD daily chart created with TradingView

EUR/USD TRADER SENTIMENT

Retail positioning data shows 52.14% of traders are net-long, with the long-to-short ratio at 1.09 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, sothe net-long skew in traders’exposure suggests that the EUR/USD trend is biased downward.

However, the net-long tilt has narrowed compared with last week, with the number of traders on that side of the spectrum down 9 percent. While it is too early to extrapolate this to suggest a positioning shift is underway, it may certainly speak to cooling selling pressure.

See the full IGCS sentiment report here.

EUR/USD TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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