The Start of a New downtrend for the Euro?

EUR/USD Technical Analysis – 3 April 2017

EUR/USD spot: 1.0669

Support: 1.0624, 1.0495, 1.0345

Resistance: 1.0716, 1.0767, 1.0825

Strategy:

  • Long on a bullish reversal above 1.0605
  • Profit targets: 1.0716, 1.0767
  • Stop loss: 1.0605
  • Switch bias to short below 1.0605

Euro Rally Loses Steam

The Euro rally finally ran out of steam as we expected it to do, just as short term sentiment shifted in favour of the Euro. There may still be some downside to come before we see consolidation. Nevertheless, current levels are offering longer term Euro bulls a good entry point.

The US dollar index was up 0.78% for the week after a three-week losing streak. US economic data was mostly weaker and promoted New York Fed President William Dudley to hint that the Fed was in no rush to hike rates. US consumer spending rose just 0.1% last month. This still didn’t stop the dollar rally, which was driven by week-end liquidation of Euro longs more than by fundamentals.

The only scheduled data release likely to be significant this week will be the publication of the ECB meeting minutes on Friday. There may also be news regarding the budget, healthcare and tax reform in the US which could have an impact on the USD. Barring any surprises, technical levels are likely to frame the price action this week.

The Long-Term Picture is Neutral for Now

A case can now be made for both a long-term bear trend and a medium-term bull trend. Sentiment for the medium to longer term is still in favour of the USD but price action and a move towards parity is still not out of the question. The key to the next move on the longer charts will be the way in which the pair reacts to good or bad news in the next month. If news that should be positive for the dollar is ignored, we will know that the market is still too long of USD positions.

If we are really going to see a longer-term change in trend, we must see the Euro gather momentum above 1.0825. On the other hand, if the Euro fails to find support above 1.06, we will likely see another attempt at support at 1.0495 and 1.0345.

2017-04-03-eurusd-weekly-chart

EUR/USD Weekly chart

Look for a re-Test of the ‘Breakdown Zone’ in the Short Term

Unless the Euro’s slide gathers momentum, we should see a retest of the break between 1.0760 and 1.0820, before we see a bigger move in either direction. When the trend becomes unclear, the first move is usually a retest of the most recent break. This sort of bounce will probably come from a consolidation somewhere between 1.0605 and 1.0670. If there is no support above 1.06, we can expect a sharp fall to 1.0495.

2017-04-03-eurusd-4h-chart

EUR/USD 4-Hour Chart

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