EUR/USD builds range, $1.20 resistance holds bulls at bay
EUR/USD had a big summer, gaining as much as 11.5%. But so far $1.20 has been a brick wall of resistance that bulls haven’t been able to overcome.
EUR/USD technical outlook:
- EUR/USD gained as much as 11.5% from the May lows up to the September high.
- Since failing to break through the $1.20 level in early September, EUR/USD has built into a range-bound formation with support showing in the $1.17-$1.175 area on the chart.
EUR/USD from $1.20 resistance, into a range
It was a surprisingly strong summer for the euro as the currency gained as much as 11.5% against the dollar from the May lows up to the September highs.
The fact that this took place as the continent of Europe continued to slug through a global pandemic along with some weak growth numbers is perhaps even more impressive. On the first day of September, EUR/USD touched the $1.20 level for the first time since April 2018; and that resistance inflection has since put that bullish trend on pause.
For the first half (H1) of September, that bullish trend in EUR/USD has continued to digest. This has even taken on tonality of a range-bound market, with support holding multiple tests in the $1.175 area as resistance has held around psychological levels at either $1.19, $1.195 and of course, the big figure at $1.20. Inflections at or around these levels can even be spanned back as far as late July
EUR/USD four-hour price chart
EUR/USD: IGCS retail sentiment majority bearish – keeping door open for topside
Incorporating sentiment into the matter adds a bit of clarity as retail traders remain net short in the EUR/USD pair with a little over 60% of traders in the IG client sentiment (IGCS) sample with net-bearish positions. We generally take a contrarian view to crowd sentiment, so potential may remain for continued topside, particularly for traders looking to approach this near-term range with a prior trend-side bias. This can keep focus on support for the time being.
Also applicable in the IGCS study is a recent shift to a lessened net-short position, highlighting the possibility of reversal as retail traders grow less and less bearish on the pair; and given the current technical backdrop, the recent range can help to mark the battle lines for such a scenario.
A breach below the $1.17-$1.175 area can begin to open the door to possible reversal themes in the pair, and given the historical impact of the $1.15 level, this could be an operative area to follow for that next spot of big picture support if a reversal does begin to show.
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