Euro Price Outlook: EUR/USD V-Shaped Reversal Stalls Before 1.1000
Euro Talking Points:
- The 1.1000 handle has been a stumbling block for bulls over the past month, holding two separate resistance inflections.
- The first resistance reaction at 1.1000 led to a pullback down to support at 1.0750, which held for a week as we approached the FOMC rate decision. But after the FOMC and ECB outlay on Wednesday and Thursday of last week, the pair quickly re-tested the 1.1000 handle and was again unable to break through. The resistance reaction from the second test has so far led to another higher-low, begging the question as to whether bulls can force a 1.1000 break by the end of the year.
It was looking bleak for the Euro as we traded through the month of September, but just as last Q4 showed signs of change in the pair, matters began to shift in August and then reversed in November.
Ahead of the FOMC rate decision on November 1st there was even potential for a continued EUR/USD breakdown. The pair made a push down to support of 1.0520 that morning and the door was seemingly open for sellers to push for another test through the 1.0500 handle. But as the statement was released and as the press conference began, the US Dollar began to slide-lower, and this helped to buoy the Euro in the EUR/USD pair. The Friday NFP report that followed that was key, as it allowed for a deeper selloff in the USD and in EUR/USD, this pushed a higher-high – with resistance ultimately showing at the 1.0750 level.
That resistance held for a week, with a falling wedge building in the pair, but it was the November 14th release of CPI data out of the US that extended the bullish theme with price making a fast push up to the 1.1000 handle over the next couple of weeks. And this is where our saga with 1.1000 resistance began.
EUR/USD Daily Price Chart
EUR/USD Longer-Term
From the weekly chart it becomes clear that there’s been a shift away from the consistent sell-off that held through August and September. And there remains bullish breakout potential as given the persistent push from buyers after that 1.0750 support came into play after previously showing as resistance after the NFP print in early-October.
The bigger question is whether bulls will be able to make much progress over the 1.1000 level which, at this point, remains a question mark. As a case in point of how impactful psychological levels can be, it was the 1.0500 zone that ultimately stalled bears as bulls slowly started to re-enter through the month of October. And then as soon as there was a bullish catalyst for EUR/USD in November, buyers were ready to pounce which is what helped to create that breakout to 1.1000.
Above 1.1000, the next spot of resistance is at 1.1069 followed by 1.1090.
EUR/USD Weekly Price Chart
--- written by James Stanley, Senior Strategist
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