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EUR/USD technical analysis: euro rally into Fibonacci resistance

Both the ECB and FOMC helped to serve EUR/USD bulls but the pair is now testing a big zone of Fibonacci resistance – can buyers break through?

Dollar Source: Bloomberg

EUR/USD talking points:

  • EUR/USD had a strong final nine months of 2020 trade, but first quarter (Q1) saw a bearish reversal of that move
  • The final day of Q1 produced a low on EUR/USD and bulls have been pushing-higher ever since

The EUR/USD rally has come back to life. After a strong showing in the final nine months of 2020 trade, EUR/USD bulls took a rest in Q1 as prices pulled back before finding support at a long-term Fibonacci level. That price helped to cauterize support as buyers showed up around the Q2 open, and the pair has shown consistent and strong momentum-higher ever since.

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EUR/USD eight-hour price chart Source: TradingView
EUR/USD eight-hour price chart Source: TradingView

EUR/USD rally runs into confluent Fibonacci resistance

The past two weeks have brought rate decisions out of both Europe and the United States, and each seemed to serve this trend in a similar way, helping bulls to continue the climb. But prices have just run into a zone of resistance that may be able to provide pause for the move.

This zone runs from 1.2134-1.2167, and each of those prices are 50% markers from major moves spanning 2000-2008 and 2014-2017. And this area of prices has had a pull on price action recently, as well, as this helped to set resistance in December before bulls posed a breakout, after which it became support in early-January and, then again as resistance in February.

EUR/USDdailyprice chart Source: TradingView
EUR/USDdailyprice chart Source: TradingView

EUR/USD higher-low support potential

Given the momentum of the recent trend combined with that big zone of resistance coming back into play, and EUR/USD may soon present pullback potential. The bigger question will be just how aggressively bulls may react as USD-weakness continues to drive some very strong themes through global markets.

Taking a look at the four-hour chart below, and the big spot of possible support that just sticks out runs from 1.1965-1.2000. But, before that comes into play is a Fibonacci level from the same study that produced the price that helped to set the Q1 low, and that shows at 1.2033. A hold here would denote anticipation from buyers unwilling to wait for a 1.2000 re-test. There’s another level that’s even closer to current price action which could similarly display that anticipation, and that’s from a group of prior swing-highs and lows that plots around 1.2060. Similarly, a hold here would highlight a sense of aggressiveness from buyers that would keep the potential for topside trend continuation as an attractive theme to work with.

EUR/USD four-hour price chart Source: TradingView
EUR/USD four-hour price chart Source: TradingView

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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.

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