EUR/USD Technical Analysis – 10 April 2017

Sentiment is now almost neutral

EUR/USD spot: 1.0581

Support: 1.0570, 1.0495, 1.0345

Resistance: 1.0630, 1.0765, 1.09

Strategy:

  • Long on a strong bullish reversal above 1.0495
  • Profit targets: 1.0765, 1.09
  • Stop loss: 1.0495
  • Switch bias to short below 1.0495

Last Week’s Action

Just as it began to look like the Euro wouldn’t reach our 1.0620 target, it broke resistance and fell to 1.0580. We were waiting for a bullish reversal which didn’t transpire and may be a sign of further weakness to come. Very little data affected the market last week, apart from US employment data. US non-farm payrolls fell short of expectations, but the market chose to focus on the unemployment rate and wages, triggering a late rally in the USD.

We can Expect a Noisy Week

There is plenty of low impact data out this week, so we can expect a lot of noise on this front. The first round of French elections may see further weakness in Euro – though risk is probably limited. Also, ECB data on portfolio flows indicates increased inflows which is bullish for Euro if the trend continues.

In the US, Fed Chair Janet Yellen will speak today and PPI, retail sales and employment data is due later in the week. Political news out of US has slowed but the possibility for surprise remains.

While sentiment is negative for the Euro across all timeframes, aggregate forecasts imply limited downside. The 3-Month forecasts only imply a move to 1.0510.

Decision Time on the Long-Term Chart

On the weekly chart the Euro has erased most of the gains it made in March. The weekly trend shows two higher highs and one higher low – and if it reverses above 1.05 we will have two higher lows. However, the longer term down trend also remains intact as long as the pair remain below 1.10.

That means that the 1.05 area becomes critical support. There are a number of potential support levels between 1.047 and 1.052, so don’t read too much into any one level but rather watch the price action in this area.

Below 1.05 a very strong case can be made for an extended move lower, while a bounce above that level will target 1.09.

2017-04-10-eurusd-weekly-chart

EUR/USD Weekly chart

Bullish Euro Channel Being Established on Short Term Charts

If the Euro stays above 1.0570 the pair will have established a neat bullish channel, with an initial bounce to 1.0630 to be expected. That level of 1.0630 proved to be strong support last week and the market will now want to test it as resistance.

If the 1.0570 level doesn’t hold, a move down to find the key support level between 1.0474 and 1.0520 should be expected.

The short-term targets are quite tight, so traders may do better to focus on the longer-term opportunities this week.

2017-04-10-eurusd-4h-chart

EUR/USD 4-Hour Chart

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