Euro Technical Forecast: EUR/USD Tug-of-War Continues at Resistance
EUR/USD, Euro Talking Points:
- EUR/USD has put in a strong Q3 outing even as the European Central Bank has pushed into a rate cutting cycle.
- USD-weakness has certainly held some drive here but after EUR/USD stalled at the 1.1200 level in August, bulls have not been able to break much fresh ground.
- I discussed the pair in this week’s US Dollar Price Action Setups article and video, and as shared there, EUR/USD remains one of the more attractive venues for those looking for a bounce in DXY or the US Dollar. GBP/USD and AUD/USD could make more attractive candidates for USD-weakness scenarios.
It’s been a strong Q3 for EUR/USD, even with the European Central Bank pushing a rate cutting cycle. Notably, buyers showed up to defend the 1.1000 level ahead of the European Central Bank’s rate cut in September, launching the move back up to resistance at the same 1.1200 handle that held the highs in August.
From a strategy standpoint, there could be more attractive venues for USD-weakness scenarios, as I looked at in this week’s US Dollar Price Action Setups. Both Aussie and Sterling are backed by economies not in a similar cutting posture as the Fed and ECB, and each of AUD/USD and GBP/USD have been able to drive trends up to fresh yearly highs even as EUR/USD remains in the confines of the 21-month range.
Of particular interest for this week was the re-appearance of a long-term resistance level at 1.1212. This is the 61.8% retracement of the lifetime move in the pair and it came into play on Wednesday, leading to a fast short-term reversal. The level saw a degree of defense later in the week when sellers were able to hold resistance around the same 1.1200 handle that was in-play in August, and this keeps the door open for lower-highs.
EUR/USD Monthly Price Chart
EUR/USD Weekly Doji
While that resistance level produced a strong reaction, bulls were not yet ready to relent. At this point the weekly bar is nearing the close as a doji and that’s probably not what buyers wanted to see after a failed breakout above the 1.1200 handle.
EUR/USD Weekly Price Chart
EUR/USD Daily – Strategy for Next Week
That bullish support becomes a bit more clear on the daily chart as there’s an upward-sloping trendline taken from the low of 1.1002 from a few weeks ago.
The lower-high structure discussed on Thursday retains potential as there hasn’t been much for bullish drive above 1.1175, which is below the 1.1200 resistance which is inside of the 1.1212 level. Notably, all of this shows inside of last year’s high at 1.1275 so the case can still be argued that we remain within the 21-month range. And on the fundamental side of that argument, it’s not like there’s a host of strong economic data points out of the Eurozone that could substantiate an argument of hawkishness around the European Central Bank.
So, if we do see a USD bounce next week through the Q4 open or through the Non-farm Payrolls report, range continuation in EUR/USD remains a viable venue. But for USD-weakness, there may simply be greener pastures elsewhere, such as a pair that’s recently been able to show bullish drive through fresh yearly highs.
EUR/USD Daily Price Chart
Chart prepared by James Stanley, EUR/USD on Tradingview
--- written by James Stanley, Senior Strategist
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
City Index is a trading name of StoneX Financial Pty Ltd.
The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.
While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.
StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.
It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.
StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.
© City Index 2024