EUR/USD Stalls Out After Monday’s Breakout Day

EUR/USD Forecast Video for 11.01.23 by Bruce Powers

Following a sharp two-day advance, the EUR/USD stalled out Tuesday trading inside day with a very narrow daily trading range. This is a form of consolidation that should resolve to the upside if the bulls have their way, and given bullish trend indications for the pair.

Bullish Momentum Picks Up

Last Friday the EUR/USD found support at a low of 104.82 and bounced, ending the day at a 3-day high. Bullish momentum persisted through Monday, triggering a trend continuation signal, with the pair ending the day near trend highs. Support from last Friday was near the 34-Day EMA, which can now be used going forward as a key trend indicator, as it has been tested as support and price turned higher after hitting it.

It was only in mid-December that the EURUSD broke out above its long-term downtrend line. That followed a bullish breakout above the 200-Day EMA trend indicator a couple weeks earlier. This price behavior shows the EUR/USD in a strong position with the chance for a continuation higher improving.

Watch for Narrow Day Breakout

If the EUR/USD ends Tuesday with an inside day, that pattern can be used for signs of which direction comes next. Certainly, a pullback and further consolidation is possible. A bear signal is indicated on a drop below Tuesday’s low of 1.0712 (at time of writing). However, it may be short lived as the underlying bull trend can kick in again at any time.

Bullish Trend Continuation Signal

For a bullish breakout to occur, and begin the second leg up, a breakout above Tuesday’s 1.0759 high is needed.

If an upside breakout occurs, and Tuesday ends as an inside day, the EUR/USD can be watch for the completion of a measured move as a target. However, risk management protocols are critical as the target may not be reached.

A Target Using Measured Move Pattern

A measured move is where the price change in the second leg of a trend or swing matches the first leg. In this case, the EUR/USD ended its first leg up on Monday at a high of 1.0760 for a distance of 279 pips. The measurement is starting at Friday’s 1.0472 low. The second leg up, if it is to occur, will start at Tuesday’s low of 1.0712. Adding 279 pips to that low produces an estimated eventual target of at least 1.0991. Lower targets can be found at two Fibonacci extension levels of 1.0805 and 1.0894.

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