Euro testing near-term structural support- a threat for recovery while above 1.1275

Euro is trading into fresh yearly lows today with price now testing key near-term support objectives. Here are the updated targets and invalidation levels that matter on the EUR/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

EUR/USD DAILY PRICE CHART

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Technical Outlook: In my Weekly Technical Perspective on Euro we noted that EUR/USD was, “testing a make-or-break level” early in the month with a close below 1.16 to risk substantial losses. Price is down more than 3% month-to-date with the pair responding to slope today in US Trade. We’re on the lookout for possible exhaustion at these levels with the broader short-bias vulnerable near-term while above 1.13.

EUR/USD 240MIN PRICE CHART

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Notes: A closer look at crude price action further sees Euro posting a 4-hour outside-reversal bar off confluence support at 1.1312 where the July 17th swing low converges on slope support extending off the May lows. Long-term structural support rests just lower around~1.1274–price is vulnerable for a near-term recovery off one of these levels.

Interim resistance stands at 1.1366 with near-term bearish invalidation now lowered to 1.1448- a breach above this level would be needed to suggest a more significant low is in place. A downside break sub-1.1274keep the focus on the key 1.1164/86 support target – a region defined by the 61.8% Fibonacci retracement of the 2017 advance and the measured move of the June / July consolidation break.

Bottom line: The immediate short-bias is vulnerable heading into these support targets with a breach above 1.1448 needed clear the way for a larger recovery. From a trading standpoint, look to reduce short-exposure / bring in protective stops here and be on the lookout for signs of price exhaustion (note we’re already marking divergence into these lows). Keep in mind we get the final read on July Eurozone CPI figures tomorrow.

EUR/USD TRADER SENTIMENT

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• A summary of IG Client Sentiment shows traders are net-long EUR/USD - the ratio stands at +1.46 (59.3% of traders are long) – weak bearish reading
• Traders have remained net-long since August1st; price has moved 2.9% lower since then
• Long positions are 0.6% lower than yesterday and 3.3% higher from last week
• Short positions are 5.3% lower than yesterday and 13.0% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger EUR/USD-bearish contrarian trading bias from a sentiment standpoint.