EUR/USD Bearish Trend Holds as Key Support Levels Strengthen

Euro, EUR/USD, IGCS – Technical Outlook

  • The Euro continues to consolidate, but the general downward trend remains intact
  • On the 4-hour chart, EUR/USD appears to be establishing a key trendline
  • IG Client Sentiment shows rise in EUR/USD short bets, suggesting a reversal

Euro technical analysis

The euro remains in a context of consolidation against the US dollar since it downtrend exhaustion warnings in last week’s coverage. Although this is a mostly technical briefing, it should be noted that the single currency remains vulnerable to ongoing geopolitical developments around Ukraine. The Federal Reserve’s interest rate decision is also expected later this week.

From a technical perspective, the Euro appeared to find support just above the April 2020 lows (1.072 – 1.0793) last week. While the broader downtrend remains intact, prices have also been unable to find any significant upward progress over the past 5 trading sessions. Key resistance appears to be the former support zone (1.1186 – 1.1122), with the 50 day simple moving average above it.

EUR/USD daily chart

Chart created in TradingView

EUR/USD 4 hour chart

On the 4-hour setting below, EUR/USD appears to be carving out a short-term bullish trend line since the start of the month. This is because the 50-period SMA has acted as resistance, maintaining a downward direction. A confirmation push above the SMA would expose both the 100 period line as well as the resistance at 1.1095. The clearing of the latter could open the door for an extension of gains towards a downtrend line from May 2021. Otherwise, the clearing of 1.0804 exposes the 2020 lows.

Euro Technical Outlook: EUR/USD Bearish Trend Continues as Key Support Levels Strengthen

Chart created in TradingView

Euro IG Client Sentiment Analysis – Bullish

When it comes to IG Client Sentiment (IGCS), around 63% of retail traders have a net long position in EUR/USD. The IGCS tends to work as a contrarian indicator. Given that most traders remain biased to the upside, this suggests that prices may continue to decline. However, the downside exposure increased by 14.4% and 11.26% from yesterday and last week respectively. With this in mind, the combination of global and recent positioning changes suggests that EUR/USD may soon reverse higher.

Euro Technical Outlook: EUR/USD Bearish Trend Continues as Key Support Levels Strengthen

*IGCS data used from March 14and report

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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