EUR/USD Forecast – Near-term Outlook Improves for the Euro

EUR/USD Forecast Video for 02.01.23 by Bruce Powers

The EUR/USD showed signs of improvement Thursday as it closed above 1.0659, the high of last week, thereby confirming a breakout of an inside week. Thursday’s close of 1.0661 was the highest daily close in 10 days.

As we head to the end of Friday’s session it looks like the pair could end the day with the highest close of the uptrend. Nevertheless, a new closing weekly high is enough of a bullish signal to be biased towards the long side starting in the new year.

Rising Trend Is Clear

Although momentum has died down over the past couple of weeks the EUR/USD remains in a clear uptrend. The pair is above its downtrend line and price is slowly moving away from the line. In addition, it looks like the month of December is going to end strong, with a close in the top quarter of the month’s range. Together, indications are showing that the EUR/USD is ready to trend higher.

Critical near-term support of the uptrend is at the 12-Day EMA, now at 1.0608. Weekly support is just below the 12-Day EMA at this week’s low of 1.0595. If a deeper correction does come before moving to new trend highs, watch for support first around the 55-Day EMA, now at 1.0379, along with the 38.2% Fibonacci retracement level at 1.0352.

Shallow Correction Is Bullish

So far there has only been a shallow correction of 1.5% since the pair reversed off a high of 1.0736 several weeks ago. That trend high completed a 61.8% Fibonacci retracement. A shallow retracement, relative to the five prior corrections in the uptrend, ranging from 3.7% to 1.4%, is a sign of buying strength as buyers get more aggressive during weakness.

Continuation of Trend

Next, watch for a bullish trend continuation signal on a daily close above the prior trend high of 1.0736. If the EUR/USD can keep going the pair then heads towards a price zone around the 127.2% Fibonacci extension at 1.0781, and a monthly high at 1.0787. Above there is the 1.618% Fibonacci extension at 1.0837.

Prior Advances Can Help with Targets

It is also interesting to look at prior advances in the uptrend by measuring a swing low up to the next swing high. There were seven advances during the current uptrend with a high of 4.8% and a low of 2.7%. The average was a 3.7% advance. The most recent swing low in the EUR/USD was 1.0573. A 3.7% rise from there would put the pair at 1.0964, a 2.7% advance occurs at 1.086, and 4.8% improvement is at 1.1080.

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