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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.

This information has been prepared by IG, a trading name of IG Markets Limited. 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. See full non-independent research disclaimer and quarterly summary.

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