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Talking Points
responds to up-slope resistance, looking for validation of 2015 trendline breakout Check out our New 3Q projections in our . Join Michael for Live Weekly Strategy Webinars on EUR/USD Daily Timeframe
Technical Outlook: Euro tested up-slope resistance yesterday after breaking above a multi-year trendline extending off the August 2015 high. Heading into the European Central Bank (ECB) interest rate decision tomorrow, the immediate focus range is 1.1439-1.1616. The immediate advance as at risk while within this range with the broader outlook weighted to the topside while above 1.1285.
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EUR/USD 240min Timeframe
Notes: A closer look at price action sees the pair reversing off up-slope resistance this week with the 2016 high converging on the 75% line just higher at 1.1616. Interim support rests at 1.1495 with the immediate focus higher while above 1.1439- A break below this region would risk a larger correction targeting 1.1366 & broader bullish invalidation at 1.1285-1.1312.
A breach of the highs keeps the broader long-bias in play targeting subsequent topside objectives at 1.1714 & the upper parallel (currently ~1.1770s). As always, these interest rate decisions invite a great deal of volatility and the focus will be on the accompanying commentary from President Mario Draghi.
From a trading standpoint, I would be looking to fade weakness on a spike lower tomorrow into the lower parallels If is heading higher, price should hold above the weekly range lows. At the same time, failure at the upper parallel again would suggest near-term exhaustion in price- stay nimble into the release.
A summary of shows traders are net-short EUR/USD- the ratio stands at -2.27bullish reading We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. That said, Positioning is less net-short than yesterday but more net-short from last week and the combination of current sentiment and recent changes gives us a further mixed near-term trading bias. Bottom line: Sentiment is coming off extremes and highlights the near-term risk to this advance in the Euro but ultimately, I'm looking to fade a pullback in the pair targeting a breach of the 2016 highs. What to look for in EUR/USD retail positioning -
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- Written by Michael Boutros, Currency Strategist with DailyFX
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