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

Chart prepared by James Stanley, EUR/USD on Tradingview

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

Chart prepared by James Stanley, EUR/USD on Tradingview

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