EUR/USD Forecast – EUR/USD Takes a Vacation

EUR/USD Forecast Video for 26.12.22 by Bruce Powers

It is looking like the EUR/USD will finish the week, inside week and inside day. This reflects the low volatility environment and narrow range that has been seen for the past six trading days. Until the pair gets out of this range traders can expect a continuation of the difficult trading environment. Currently, the top of the daily range is at 1.0663, with a low at 1.0573. A breakout of the weekly range can also be watched, in which case the high is slightly different at 1.0659.

Uncertainty Prevails

Think of this phase as if the EUR/USD is building up energy in preparation of its next move. Uncertainty dominates during as the pair may look like it’s going to go higher and then fails and turns back down. Then, there’s an early bearish signal and it looks like price will drop but doesn’t keep going.

Wednesday was a good example on the downside. A breakdown of an inside day was triggered with the possibility of follow-through from the breakdown of the bearish wedge that triggered last Friday. The pair subsequently dropped below the prior day’s low of 1.0576. Support was quickly found though at 1.0573, with price bouncing from there into Friday.

Conflicting Evidence

The breakdown from a bearish wedge anticipates lower prices. So far that has not occurred in the EUR/USD, which puts the breakdown at risk of failure. In other words, there is not a clear selloff so the pattern may fail and not lead to more selling.

Support of the past six days along with the downtrend line should be watched in the near-term. Also note that the 21-Day EMA is at 1.0521, which might see support as well. Also be aware of the convergence of both the uptrend and downtrend lines, plus the 38.2% Fibonacci retracement, and the 21-Day EMA. Currently, that convergence area, roughly around 1.0538 will be reached in around four trading days.

Wider View Remains Bullish

The larger picture remains bullish as the EUR/USD is above it’s downtrend line, above the 200-Day EMA, and the 21-Day EMA has crossed above the 200-Day. Further, there are a series of higher swing highs and higher swings lows, that have developed, confirming an uptrend.

Beware False Breakouts

The possibility of false breakouts, either up or down, is real. It is not uncommon that false breakouts can occur from a low volatility environment as lots of market participants are waiting for a breakout and many want to get in as early as possible.

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