Euro Short-term Technical Outlook: EUR/USD Plunges into October

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

• Euro plummets more than 1.3% off yearly high / technical resistance- threat for deeper correction
• EUR/USD three-day decline now approaching initial support hurdles- NFP on tap
• Resistance 1.1135/40 (key), 1.1192, 1.1228- Support 1.1038/44, 1.10, 1.0980 (key)

The Euro is poised to mark a third consecutive-daily decline with EUR/USD reversing sharply off uptrend resistance. The losses threaten a deeper correction within the broader uptrend and we’re on the lookout for a possible exhaustion low in the days ahead. Battle lines drawn on the Euro short-term technical charts.

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

Technical Outlook: In last month’s Euro Short-term Technical Outlook we noted that we were, “on the lookout for an exhaustion low in the days ahead. From a trading standpoint, look to reduce short-exposure / lower protective stops on a stretch towards the lower parallels – losses should be limited to 1.0947 IF the June advance is to remain intact…” EUR/USD had already marked a low at 1.10 the previous day with Euro rallying more than 1.9% into the close September.  

The advance stalled into uptrend resistance for a fourth-day on Monday with the subsequent sell-off accelerating today on the heels of softer-than-expected Eurozone inflation data. The decline was further exacerbated by headlines of an imminent Iranian attack on Israel and the US Dollar has found some footing here. The focus is on this pullback into initial support at the objective yearly open / September open at 1.1038/44- looking for possible inflection off this mark this week.

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 descending pitchfork with the median-line seen just above the 1.1038/44 support zone. A break / close below this threshold would threaten a test of broader uptrend support with initial objectives eyed at the 1.10-handle and the 38.2% retracement of the April advance at 1.0980- look for a larger reaction there IF reached (broader bullish invalidation).

Initial resistance is eyed at the October open / December high at 1.1135/40 with a topside breach / close above the yearly high-close at 1.1192 needed to mark uptrend resumption. Subsequent resistance objectives eyed at the 2023 high-day close (HDC) at 1.1228 and the highlighted Fibonacci confluence at 1.1275/92.

Bottom line: Euro has turned from technical resistance and threatens a larger correction within the broader uptrend. From a trading standpoint, rallies should be limited to the December high IF price is heading lower on this stretch – ultimately, Euro would need to mark an exhaustion low ahead of the 1.0980 for the broader April rally to remain viable. Keep in mind we are just carving the monthly / quarterly opening-ranges here with US non-farm payrolls on tap Friday. Stay nimble into the release and watch the weekly closes for guidance.

Key EUR/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

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• British Pound Short-term Outlook: GBP/USD Breakout Eyes Resistance

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

Follow Michael on Twitter @MBForex