Euro technical forecast: EUR/USD eyeing 2017 bottom after clearing 2020 low

Euro technical analysis

The euro is aiming for the worst week against the US dollar since late February, which was when EUR/USD sank the most since March 2020. Over the past 24 hours, the single currency cleared the 2020 low, confirming a breakout under 1.0636. That has the pair setting course for the 2017 bottom, where a zone of support between 1.0340 – 1.0388 awaits it.

Getting there does entail clearing the 100% Fibonacci extension at 1.0496 on the chart below. Beyond the 2017 low sits levels last seen in 2002. The 138.2% extension can also kick in as support at 1.0233 if prices declined to those levels. Keep a close eye on RSI, positive divergence does continue to persist. That shows fading downside momentum, which can at times precede a turn higher.

In the event of a turn higher, there is some room higher before common Simple Moving Averages come into play. These include the 20- and 50-day lines, which can hold as resistance and reinstate the broader downside focus. Immediate resistance could be the 2020 low at 1.0636, which could reinstate itself as a new ceiling.

EUR/USD daily chart

Euro IG Client Sentiment analysis – bearish

Looking at IG Client Sentiment (IGCS), about 78% of retail traders are net-long EUR/USD. IGCS tends to function as a contrarian indicator. Since the majority of traders are biased to the upside, this suggests that prices may continue falling. This is as downside exposure decreased by 6.92% and 18.39% compared to yesterday and last week respectively. With that in mind, the combination of these readings work together to offer a stronger bearish contrarian trading bias.

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.