- EURUSD erased modest selling last week to close in the green back towards 2010 swing-low
- How price action plays out upon another test of just over 11900 will be key to outlook
- Watch the broader US Dollar Index (DXY), of which the euro is a big part of, as it pushes down into major long-term support
Looking for a longer-term view on EURUSD? Check out the Q3 Forecast.
Heading into last week EURUSD was coming off a week where we saw a key reversal-bar develop on the weekly time-frame, suggesting we would see lower prices. And while that was the case initially, to finish out the week the euro managed to close in the green. The turn lower from the 2010 low has thus far proven to spark limited selling interest, and in the days ahead it looks like another challenge of the area surrounding 11900 is in store. Can the euro push on through or will it find sellers again and at the least force a period of consolidation or worse? This is where watching price action upon a drive higher into overhead levels will be important. Should we see a rejection, or key reversal develop, then the focus will shift lower to last week’s lows just below 11700. If that doesn’t hold then the confluence of the April trend-line and 2016 high will become targeted near 11600.
If, however, we see a clean close above 11910 (reversal-week high) then the bias will be for a move to the upper parallel tied to the trend-line off the April low and the 2012 low at 12041. If we see a move unfold to the 12000 area the euro may be closing in on a point where a meaningful top may form.
Looking at the US Dollar Index (DXY), of which the euro makes up about ~57% of the index, it’s trading in a major long-term support zone and could soon provide the backstop needed for the dollar to stop its slide and start a rebound across the board. While this is a macro-view, we’re in the vicinity where a sizable reaction (bounce) could soon be in store for USD.
US Dollar Index (DXY): Monthly
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—Written by Paul Robinson, Market Analyst
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