Euro May Remain at Risk, But What are EUR/USD Levels to Watch for Reversal Hints?

EURO TECHNICAL ANALYSIS

The Euro is coming off the worst week against the US Dollar in almost 2 years. On the daily setting, EUR/USD continues to be in a precarious state. Markets do not move in a straight line however. Zooming in on shorter timeframes, such as the 1-hour setting, could offer preliminary warnings of exhaustion. Is this the case for the Euro？

It should be noted that the swings of Russias attack on Ukraine remain a source of fundamental volatility due to proximity risk for the Euro. The European Central Bank will also be meeting on March 10th to set monetary policy. Expectations for a hawkish approach later this year have been notably cut back. Still, proximity risk to the ECB rate decision may offer the Euro some breathing space in the interim.

On the daily chart below, EUR/USDs slide has brought it closer and closer to lows from April 2020. These make for a range of support between 1.0727 and 1.0793, before the 2020 kicks in at 1.0636. In the near-term, keep a close eye on the 20-day Simple Moving Average (SMA). This could hold as resistance in the event prices pivot higher, reinstating the dominant downside focus.

Immediate resistance does seem to be the 78.6% Fibonacci extension at 1.0927, followed by the 61.8% level at 1.1048. Let us look at the hourly timeframe to see if there are preliminary signs of exhaustion building up.

EUR/USD 1-HOUR CHART

On the next chart below, EUR/USD can be seen establishing a potential range of support between 1.0804 – 1.0842. This is an hourly setting, so price action here can unfold rather quickly. It should be noted that as this zone formed, positive RSI divergence emerged, signaling fading downside momentum. This can at times precede bullish reversals.

In the event prices do turn higher, traders can keep a close eye on the 50- and 100-period SMAs. The former is sitting under potential resistance at 1.094. Breaking above the latter would expose the 100-period SMA. This can reinstate a downside focus, sending the Euro back to pressure the 1.0842 – 1.0804 support zone. Otherwise, confirming a breakout above the 100-period SMA could spell further gains in the near-term.