EUR/USD technical analysis: euro weakness forms lower highs

The euro has faced headwinds against its US dollar peer over recent trading sessions as the EUR/USD price action struggles to overcome bearish trend resistance.

EUR/USD outlook: euro price action mired by lower highs

  • EUR/USD price action has struggled to maintain upward momentum
  • Euro weakness versus the US dollar is forming a string of lower highs
  • IG client sentiment hints that EUR/USD could face more headwinds

EUR/USD bears have attempted to wrestle back control over recent trading sessions. This follows a hefty 300-pip rebound staged during April that erased nearly half of the euro’s slide earlier in the year. That said, the latest rally by EUR/USD price action seems to be stalling out at technical resistance posed by a descending trendline.

EUR/USD price chart: weekly time frame (September 2019 to May 2021)

This medium-term bearish trend is formed by a string of lower highs notched on 06 January and 26 February. EUR/USD appears to be respecting this technical barrier so far as the major currency pair pulls back from nine-week highs. Not to mention, euro softness against its US dollar peer caused the 20-week simple moving average (SMA) to roll over, leaving the technical indicator with a negative slope now.

The EUR/USD price action could thus look to tag confluent support underpinned by its 23.6% Fibonacci retracement of the March 2020 to January 2021 trading range. Failure to maintain this area of buoyancy could bring year-to-date lows back into focus for Euro bears. On the other hand, reclaiming the 20-week moving average and eclipsing medium-term trendline resistance could open up the door for EUR/USD to rebound toward its upper Bollinger Band.

IG client sentiment – EUR/USD trader positioning

Taking a quick look at IG client sentiment data, however, we can see that EUR/USD retail trader positioning has turned less bearish. This is judging by the 5% increase in net-long EUR/USD positioning, which outpaces the 2% bump in net shorts. Although, seeing that we generally look at retail trader positioning through a contrarian lens, this suggests that EUR/USD could continue facing headwinds in the short term.

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