EUR/USD Technical Outlook
- EUR/USD price action past three months looks like consolidation
- A move to the 2018 high over 12500 looks possible in next 1-3 months
EUR/USD may start another bull leg soon
It’s been a sloppy past three months of trading for the single currency, but that may soon come to an end as a breakout from the congestion could get underway soon. And not only is price action shaping up with a bullish bias, but it’s developing around a major long-term trend-line.
Dialing out to the monthly time-frame there is a trend-line(s) running down from the 2008 peak over key yearly highs since. Admittedly, it is a little tricky though, because as is often the case with trend-lines, depending on how it is drawn price is above one variation of the trend-line and below another variation.
Taking the trend-line variation off the high that connects the most number of points (within reason, not slicing through price action), EUR/USD broke the trend-line in August, which suggests higher prices. The points that connect are highs in 2008, 2011, 2014, and 2018. If you take a more conservative approach, widening the angle of the line a bit, you skip the 2018 occurrence, but run right into the high in September (meaning it still resistance).
So which trend-line do you adhere to?
When this happens, you can add another layer of confirmation by looking to a horizontal level that is associated with the trend-line or has acted as a meaningful price level in the not too distant past. (This works well with channels, too.) The September high is the level to watch in this case, which is also the high of the consolidation pattern – so it seems like a logical point of interest to use in conjunction with the trend-line.
A breakout above 12011 is seen as having both the congestion phase snapped along with a clear rise above both variations of the 2008 trend-line. A breakout could clear a path towards the 2018 high at 12555.
One caveat to this outlook some market participants are pointing to is the extreme positioning in the futures market. Speculators have been holding a near record long position similar to 2018, but so far, unlike 2018, the sideways pattern is holding up and doesn’t appear to be a topping sequence as it did back then. The bottom line is, as long as price action doesn’t caution a reversal extreme positioning can become even more extreme.
All-in-all, EUR/USD looks poised to make a run over the next 1-3 months, but before getting too bulled up we may need to be a little patient in waiting for a breakout to occur. Even if holding for extended periods of time may not be the preferred approach, the larger time-frame bias can help shape shorter-term term trades along the path of the dominant trend’s path.
Recommended by Paul Robinson
Check out the Q4 EURO Forecast
EUR/USD Monthly Chart (trend-lines to watch)
EUR/USD Daily Chart (consolidation period)
EUR/USD Charts by Tradingview
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—Written by Paul Robinson, Market Analyst
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