Euro Technical Forecast: EUR/USD Snapback Signals Recovery Potential

Euro rallied nearly 3% off the yearly lows with the bulls threatening a larger offensive into the yearly close. Battle lines drawn on the EUR/USD weekly technical chart.

Written by

Michael Boutros

Sr. Technical Strategist

Sun, 08 Dec 2024, 03:00 AM

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Euro rebounds off downtrend support- recovery approaching key resistance pivot
EUR/USD immediate focus is on weekly range break- US CPI, ECB rate decision on tap
Resistance 1.0670-1.0718 (key), 1.0777, 1.0877- Support 1.0420, 1.0352 (key), 1.02

Euro was off fractionally this week with EUR/USD defending a rebound off yearly trend support. While the broader outlook remains weighted to the downside, the focus into December is on this recovery with the bulls eyeing a critical pivot zone just higher. Battle lines drawn on the Euro weekly technical chart.

Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Technical Outlook: In last month’s Euro Technical Forecast we noted that, “A three-week plunge takes EUR/USD into downtrend support and a major pivot zone- risk for downside exhaustion / price inflection here. From a trading standpoint, a good zone to reduce portions of Euro short-exposure / lower protective stops- rallies should be limited to 1.0670 IF price is heading for a break lower with a closer below 1.0352 needed to fuel the next leg of the decline.” EUR/USD rallied nearly 2.9% off those lows and the focus remains on a possible test of the September downtrend.

Weekly resistance now stands at 1.0670-1.0719- a region defined by the 38.2% retracement of the yearly range and the November high-week close (HWC). Note that the median-line converges on this zone into the close of the year and a breach / close above would be needed to suggest a more significant low was registered last month / a larger trend reversal is underway. Subsequent resistance objectives eyed at the February low-week close (LWC) at 1.0777 with broader bearish invalidation at the 61.8% retracement at 1.0877.

Initial weekly support now rests with the yearly close-low at 1.0420 backed again by the 2016 low at 1.0352. A break / weekly close below this threshold is needed to mark downtrend resumption towards the lower parallel / 61.8% retracement at the 1.02-handle- look for a larger reaction there IF reached.

Bottom line: A rebound off downtrend support now threatens a test of trend resistance just higher. From a trading standpoint, the threat remains for a larger rebound while above 1.0420- look to reduce long-exposure / raise protective stops on a stretch towards 1.0670 IF reached (risk for a lager reaction there). For now, the immediate focus is on a breakout of this week’s range.

Keep in mind we have key US inflation data and the European Central Bank (ECB) interest rate decision on tap next week (25basis point cut is expected). Stay nimble into the releases and watch the weekly close here for guidance. Review my latest Euro Short-term Outlook for a closer look at the near-term EUR/USD technical trade levels.