The euro is set to fall for the fourth week in a row, with EUR/USD currently approaching multi-month trend support. While the risk of a deeper correction exists, the immediate focus is on a breakout of the target monthly opening-range for guidance, and the battle lines are being established as the week comes to a …
The euro is set to fall for the fourth week in a row, with EUR/USD currently approaching multi-month trend support. While the risk of a deeper correction exists, the immediate focus is on a breakout of the target monthly opening-range for guidance, and the battle lines are being established as the week comes to a close. On the Euro short-term technical charts, these are the most recent objectives and invalidation levels.
Euro Price Chart – EUR/USD Daily Timeframe
Technical Outlook: In last month’s Euro Short-term Technical Outlook, we stated that an eight-day rally in the EUR/USD was vulnerable and that “the threat for broader topside exhaustion is real as price approaches a key resistance confluence here with the FOMC & ECB interest rate decisions on tap next week.” The area under consideration was a “key resistance confluence at the 61.8% Fibonacci retracement of the 2021 decline at 1.1275- note that a pair of uptrend resistance slopes also converge on this threshold over the next few days and further highlight the threat for possible price inflection here.”
The euro peaked that day, falling more than 3.1% before rebounding off multi-month uptrend support in early August. The focus has now shifted to the monthly starting range, with the EUR/USD contracting just above slope support–a breakout is anticipated.
Euro Price Chart – EUR/USD 4 Hour Timeframe
A closer examination of Euro price action reveals that EUR/USD is trading within the boundaries of a descending channel formation that extends from the July high. A break to the upside here would expose the monthly range highs / resistance at 1.1041/51, which is defined by the April high-day close / 38.2% retracement of the July fall. A breach or close above this level would be required to verify a near-term reversal towards the April high at 1.1095 and the 61.8% retracement at 1.1137- expect a stronger reaction IF this level is reached.
The July open / August low around 1.0911/12 provides initial support; a breach / close below this level would indicate a more important peak was established last month. Following support targets include the June low of 1.0835, the 1.08-handle (soft support), and the 200-day moving average (currently 1.0761)- a region of concern for possible downside exhaustion / price inflection IF achieved.
The euro is testing multi-month trend support at this point, with the August opening range forming just above. The immediate focus for trade is on a breakout of this consolidation pattern for guidance (1.0911-1.1051). Rallies should be confined to 1.1137 if pricing is headed lower, with a closure below 1.09 required to feed the following leg.
Risk disclaimer:
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.
