Euro at Risk as Rally Fails, Positioning Signal Turns More Bearish

EURO, US DOLLAR, EUR / USD, TECHNICAL ANALYSIS – POINTS OF SPEECH:

• EUR / USD breaks higher fails as prices fall back into a known range
• A key counter-trend line under pressure, a break can see a test below 1.12
• Detailed position data suggests a stronger bearish bias now versus last week

EUR / USD price action seems to have developed in favor of sellers since last week’s explosive upward break failed to find a sequel. The Euro fell back through the 1.1330-78 congestion area, landing it straight back into the hacking range from which it seemed ready to escape.

The upward-sloping support line defining the limits of November’s swing bottom rise is again under pressure. A daily close below that barrier may set the stage for an extension down to challenge the 1.1140-86 area again. This is a region of significance from March-June 2020.

Regaining some sense of relief is likely to require the Euro to re-establish a firm foot above 1.1378. That would neutralize some short-term selling pressure and possibly pave the way for another run at key resistance accumulated near the 1.15 figure.

EUR / USD daily chart created withTradingView

Meanwhile, you can feel it also changed in a more bearish direction. Positioning moved to a 63.1 percent tilt to the long side almost equally divided just days ago. In fact, the net-length tilt has risen by a staggering 22.3 percent over the past week.

This is usually seen as the opposite indicator: positioning pivot to the long side is seen as suggesting that prices may be lower. The skew is still relatively modest at 1.7 long for each short, suggesting that there is room for a decrease to continue to develop.

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— Written by Ilya Spivak, Chief Strategist, APAC at DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter