EURUSD reversed off near-term resistance this week and we’ve been tracking the pullback in price as the pair approaches interim support. Price has continued to trade within the weekly opening-range but we’re looking for a possible breakdown lower before resumption of the broader up-trend.
EUR/USD Daily Price Chart
Technical Outlook: In this week’s EURUSD Technical Perspective[1] I highlighted that, “Initial resistance stands with the 2018 high-day close at 1.2409 with key resistance steady at 1.2598 where the 2008 trendline resistance converges on the 61.8% retracement of the 2014 decline.” Price rallied into 1.2409 this week before reversing sharply and while the broader picture remains constructive, the pair remains vulnerable near-term while below this threshold.
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EUR/USD 120min Price Chart
Notes: A closer look at EUR/USD price action shows the pair trading within the confines of a near-term descending pitchfork formation[4] extending off the monthly highs. A break of the ascending formation we’ve been tracking since the start of the month keeps the risk lower while below 1.2352/60. Interim support rests at 1.2318/26 with a break lower targeting the weekly opening-range[5] lows at 1.2291 backed by 1.2265 & 1.2240- both areas of interest for possible exhaustion / long-entries.
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Bottom line: EURUSD reversed from confluence resistance this week and while the immediate risk is lower, ultimately a more significant set-back should offer more favorable long entries near the median-line with a breach above near-term resistance once again targeting the high-day close backed by key resistance at 1.2452/61.
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EUR/USD IG Client Sentiment
- A summary of IG Client Sentiment[8] shows traders are net-short EURUSD- the ratio stands at -1.66 (37.5% of traders are long) – weak bullishreading
- Traders have remained net-short since Apr 18th; price has moved 16.9% higher since then
- Long positions are 4.0% higher than yesterday and 9.5% higher from last week
- Short positions are1.5% lower than yesterday and 6.1% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse lower despite the fact traders remain net-short.
