EUR/USD Technical Outlook: Could Retreat

US Dollar, Euro, EUR/USD – Technical Outlook:

• EUR/USD could retreat slightly.
• There’s not much evidence to suggest the recent rally is anything more than corrective.
• What are the key levels to watch?

EUR/USD TECHNICAL FORECAST – SLIGHTLY BEARISH

The Euro has run into significant resistance against the US dollar, raising the risk of a retreat.

EUR/USD, up 8% since September, has gained strength since earlier this month – shifting to ‘higher gears’ within a rising pitchfork channel from October. A break above an internal trendline within a rising pitchfork channel often signifies that an uptrend is gaining momentum. Repeated breaks above all the internal trendlines and the upper edge of a rising channel indicate that an uptrend is solidifying.

EUR/USD 240-minutes Chart

Chart Created Using TradingView

However, in recent days, EUR/USD has struggled to break past key converged resistance: the 200-day moving average, the August high of 1.0370, near the January 2017 low of 1.0340. As the previous update highlighted, the last time the pair was above the long-term average was in mid-2021, so the resistance could be tough to clear, at least in this attempt.

EUR/USD Daily Chart

Chart Created Using TradingView

Immediate support is at last week’s low of 1.0270. Any break below could open the door towards 1.0120, near strong support at the late-October high of 1.0090. EUR/USD needs to stay above 1.0090 for the short-term upward pressure to remain intact. Moreover, the big picture remains bearish for EUR/USD after the break this year below a slightly upward sloping trendline from 2015. The price objective following the breakout of the seven-year sideway range works out to around 0.8900.

Having said that, a break above the 200-day moving average would be a sign that the medium-term weak outlook is changing. A decisive break above could pave the way toward 1.0615 (the 38.2% retracement of the 2021-2022 slide).

— Written by Manish Jaradi, Strategist for DailyFX.com