Euro Breakout to Resistance, EUR/USD Levels

EUR/USD Talking Points:

EUR/USD put in a bullish breakout from an ascending triangle formation yesterday.
This was a counter-trend move as the prevailing trend was bearish and lasted for six months until a major spot of support came into play. The big question now is for how long this topside trend might be able to drive.
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Bulls have finally made a forward-push in EUR/USD. After spending almost a two full months chopping back-and-forth in a tighter and tighter range, bullish potential began to show more recently with a formation showing inside of the sloppy chop.

That formation was highlighted on Monday when looking at the ascending triangle in the pair. While fundamental prospects still don’t appear to be favoring the Euro, the fact that EUR/USD stalled after running into a significant spot of support in late-November, six months after the bearish trend had begun, kept the door open for reversion plays.

The ascending triangle that showed up in the middle of the range is often approached with a bullish bias and that’s so far played out. Prices have jumped up to the next major spot of resistance, running between the Fibonacci level of 1.1448 and the psychological level of 1.1500.

EUR/USD Four-Hour Price Chart

Chart prepared by James Stanley; EURUSD on Tradingview

EUR/USD: Time for Sellers to Re-Enter the Equation?

That counter-trend jump in EUR/USD has likely already taken-out a number of trailed stops that were sitting above resistance. Such an instance can serve as an accelerant for price, at least initially, as buying orders come into the market as those stops are triggered. But, there’s likely a similar scenario around the 1.1500 level, so the retracement may not yet be over.

What will likely determine this fact, however, is the US Dollar, which is what helped EUR/USD to break out yesterday. The US Dollar plummeted on the heels of a 7% CPI print, which does still keep the door open for a more-hawkish FOMC this year. In quick order, the US Dollar fast moved into an oversold state on the four-hour chart and that fact remains a day later, as prices in the USD have merely stalled around support as taken from prior resistance.

But, as shared multiple times over the past few months, the US Dollar will likely have a hard time going anywhere without at least some participation from EUR/USD. So, if that USD bullish trend is going to fire again anytime soon, then likely sellers would need to re-appear in EUR/USD in short order.

EUR/USD Weekly Price Chart

Chart prepared by James Stanley; EURUSD on Tradingview

EUR/USD Levels

At this stage, the bigger picture trend remains bearish; but we’ve only seen a little over 23.6% of that move retraced. So, there could be some continued push here as shorts get squeezed. On the resistance side, the 1.1500 level is very nearby and this would be an ‘r1,’ while the 38.2% retracement of the recent bearish trend shows around 1.1600, which can function as an ‘r2.’ The ‘r3’ zone has a couple of options: The 1.1665 prior swing low-turned-high could be of interest, but there’s a confluent zone just above that which might be a bit more actionable for an ‘r3,’ and this rests between Fibonacci levels at 1.1709 and 1.1726.

On the support side, ‘s1’ would be the spot between 1.1441 and 1.1448, both Fibonacci levels. The ‘s2’ spot is the resistance from the ascending triangle, plotted at 1.1374. And for support or ‘s3,’ the prior higher-low before the breakout at 1.1273 sticks out and given the scenario, we can even look at an ‘s4’ around the major zone of support that’s so far held the lows, plotted between Fibonacci levels at 1.1187-1.1212.