Euro Short-term Outlook: EUR/USD Threatens Bear Market Rebound

Euro Technical Outlook: EUR/USD Short-term Trade Levels

• Euro snaps three-week sell-off, rebounds off key technical support- resistance in view
• EUR/USD monthly opening-rang taking shape- threat for larger bear-market recovery
• Resistance 1.0587-1.0602, 1.0670/81, 1.0730 (key)- Support 1.0340-1.0405 (key), ~1.0305, 1.0200/04

Euro is attempting to recover off the yearly low with EUR/USD carving the December opening-range just below a major pivot zone. The focus is on a possible breakout in the days ahead with US non-farm payrolls on tap into the close of the week. Battle lines drawn on the Euro short-term technical charts into the open of the month.

Euro Price Chart – EUR/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Technical Outlook: In my last Euro Short-term Technical Outlook we noted that the EUR/USD sell-off was attempting to break the yearly lows bears eyeing a, “massive pivot zone at 1.0340-1.0406- a region defined by the 2017 low, the 2017 LDC, and the 50% retracement of the broader 2022 advance (an area of interest for possible downside exhaustion / price inflection IF reached).” Euro registered an intraday low at 1.0333 last week before rebounding sharply into the close of November. A recovery of more than 2.5% failed on Friday at the 2023 low-week close (LWC) / April low at 1.0587-1.0602- looking for inflection off this pivot zone early in the month.

Euro Price Chart – EUR/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Notes: A closer look at Euro price action shows EUR/USD trading within the confines of a proposed ascending pitchfork with the pullback rebounding off the 25% parallel yesterday. Initial support rests with the 2023 low-day close (LDC) at 1.0466 with a break / close below the 1.0340-1.0406 pivot zone needed to fuel the next major leg of the decline. Subsequent support objectives eyed at the lower parallel (currently ~1.0305) and 1.0200/04- a region defined by the 61.8% retracement of the 2022 advance and the 1.618% extension of the September decline. Look for a larger reaction there IF reached.

A topside breach above 1.0587-1.0602 would threaten a larger correction towards the 38.2% retracement / June LDC at 1.0670/81 and upper parallel. Ultimately, a breach / close above the November high-day close (HDC) at 1.0730 would be needed to suggest a more significant low was registered last month / a larger trend reversal is underway with subsequent resistance objectives seen at the August low / October LDC at 1.0777/82 and the 200-day moving average (currently near ~1.0848).

Bottom line: Euro responded to major support last week the focus into the start of the month is on this rebound. From a trading standpoint, losses would need to be limited to the 1.04-handle IF EUR/USD is heading for a larger recovery here with a close above 1.06 needed to shift the near-term focus higher. Ultimately, rallies would need to be limited to 1.0730 for the September downtrend to remain viable with a close below 1.0340 needed to fuel the next major leg of the decline.

For now, look for a breakout of the monthly opening-range which is taking shape just below resistance. Keep in mind we get the release of US non-farm payrolls on Friday- stay nimble into the release and watch the weekly close here for guidance. Review my latest Euro Weekly Technical Forecast for a closer look at the longer-term EUR/USD trade levels.

Key EUR/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex