Euro, EUR/USD, IGCS – Technical Outlook
- Euro is aiming for the worst weekly performance since late February
- EUR/USD cleared the 2020 low, which exposed the bottom from 2017
- Retail trader positioning data is further underscoring a downside bias
Euro Technical Analysis
The Euro is aiming for the worst week against the US Dollar since late February, which was when EUR/USD sank the most since March 2020. Over the past 24 hours, the single currency cleared the 2020 low, confirming a breakout under 1.0636. That has the pair setting course for the 2017 bottom, where a zone of support between 1.0340 – 1.0388 awaits it.
Getting there does entail clearing the 100% Fibonacci extension at 1.0496 on the chart below. Beyond the 2017 low sits levels last seen in 2002. The 138.2% extension can also kick in as support at 1.0233 if prices declined to those levels. Keep a close eye on RSI, positive divergence does continue to persist. That shows fading downside momentum, which can at times precede a turn higher.
In the event of a turn higher, there is some room higher before common Simple Moving Averages come into play. These include the 20- and 50-day lines, which can hold as resistance and reinstate the broader downside focus. Immediate resistance could be the 2020 low at 1.0636, which could reinstate itself as a new ceiling.
EUR/USD Daily Chart
Euro IG Client Sentiment Analysis – Bearish
Looking at IG Client Sentiment (IGCS), about 78% of retail traders are net-long EUR/USD. IGCS tends to function as a contrarian indicator. Since the majority of traders are biased to the upside, this suggests that prices may continue falling. This is as downside exposure decreased by 6.92% and 18.39% compared to yesterday and last week respectively. With that in mind, the combination of these readings work together to offer a stronger bearish contrarian trading bias.
*IGCS data used from April 27th report
— Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitt