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#1 20-05-2020 09:18:53

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2855

EUR/USD: the euro's triangular consolidation

EUR/USD: the euro's triangular consolidation

For most of the year so far, the eurodollar, the most popular forex pair, has been consolidating. This may not seem to be the case at first glance on the daily chart, but when the market forms higher lows and lower highs, it is called a triangular consolidation.

Many traders are trying to identify the direction of the EURUSD. Unlike its peers (for example, the AUDUSD), the eurodollar has been reluctant to move in either direction. The bearish traders looked at the big picture and highlighted the fundamental breakout of the common currency. The bulls, on the other hand, saw that the eurodollar was struggling to break and hold below 1.085. 

End of a long triangle

Since the beginning of 2020, the EURUSD formed a descending triangle. The trend lines of this triangle converge towards a common point, underscoring the EUR/USD's unpredictability.

From a technical point of view, the eurodollar's contraction began at the beginning of 2020. The great volatility are the result of traders' hesitation in the face of the unpredictable virus situation. In addition, the USD was and still is considered to be the safe-haven currency par excellence.

However, this technical pattern was broken on the upside. It did so at the end of last month, and the bears tried to push it down this month. As the troughs marked by the end of the triangle held, the bulls are now focusing on the next target - the measured movement of the triangle.

In a descending triangle, the longest wave is usually first, and all subsequent segments are smaller. This basic information on the formation of a triangle is enough to help traders identify the correct shape of the triangle and ignore the intermediate swings.

If we consider the lowest value in 2020 for the eurodollar as the end of the longest segment of the triangle, this means that this is the measured movement of the triangle. Or the distance the price has traveled from the end of the triangle to confirm consolidation.

This makes the rest of the second quarter of this year extremely interesting: is the rise in the eurodollar breakout a sign that risk sentiment is persisting?

"Anything worth having is worth going for - all the way." - J.R. Ewing



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