Euro Technical Outlook – Trend Break Might be Short Lived for EUR/USD

Euro, EUR/USD, US Dollar, Trend Breakout, Candlestick, Bollinger Band – Talking Points

• Euro bulls were rewarded earlier this week before a pullback surfaced
• The technical set-up from the recent rally might see Euro bears re-enter the fray
• The squeeze higher appears to have been rejected for now. Will EUR/USD go lower?

EUR/USD TECHNICAL ANALYSIS

EUR/USD cleanly broke through the topside of a descending trend channel last week and continued higher to briefly pierce minor resistance levels near 1.0680 to make a high at 1.0695.

The price action on the day that the price made that high saw a Bearish Engulfing Candlestick

formation emerged and it has gone lower in the proceeding days.

A Bearish Engulfing Candlestick opens at, or above the previous candle’s close. The length of the bearish candle ‘engulfs’ the previous green candle and it then closes below the prior candle’s open.

This reversal might signal that the descending trend may re-emerge.

The recent rally broke above the upper band of the 21-day simple moving average (SMA) based Bollinger Band. On the same day that Engulfing Candlestick materialised, the price closed back inside the band.

This potentially adds weight to the perspective that a reversal could be in play.

A bearish triple moving average (TMA) formation requires the price to be below the short-term SMA, the latter to be below the medium-term SMA and the medium-term SMA to be below the long-term SMA. All SMAs also need to have a negative gradient.

When looking at any combination of the 21-, 34-, 55- and 100-day SMAs, the criteria for a TMA have been met and might suggest that bearish momentum is evolving.

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On the downside, nearby support might lie near the previous lows and breakpoints in the 1.0480 – 1.0495 area ahead of the lows seen in December 2022 and October 2023 near 1.0445.

On the topside, the 55-day SMA is currently near the recent peak and there might be a resistance zone ahead of 1.0700.

The next resistance levels could be at the breakpoints and previous highs near 1.0740, 1.0770, 1.0835 and 1.0945 ahead of a cluster zone of potential resistance in the 1.1075 – 1.1100 area.

EUR/USD DAILY CHART

Chart Created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

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