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#1 05-01-2021 09:00:27

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3068
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EUR/USD: a long-term technical analysis of the pair

EUR/USD: a long-term technical analysis of the pair


The EUR/USD pair has been one of the best performers last year - rising from below 1.07 to above 1.23 with little or no correction. What's in store for the most popular currency pair?

Last year was marked by a major breakthrough from a technical point of view. For the first time in years the EUR/USD has broken a bearish channel. Not only did it succeed in doing so, but it also retested the upper edge of the channel, validating the break.

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What are the levels that count for bulls?

Since April 2020, the EUR/USD has been advancing vertically. With the exception of September and October, when it corrected itself, the pair has moved in a straight line.

The definition of a bearish trend involves a series of lower lows and lower highs. As long as the series remains in place, the bias remains downward. That being said, bulls should not rejoice yet, despite the EUR/USD's bullish breakout. The reason for this is the series mentioned above - as long as the series remains in place, the bias remains downward.

Therefore, a true bullish sentiment requires a break above the previous lower high. Specifically, only a move above 1.25 seals the bullish breakout, as this is the point at which the market reaches the previous low.

What should bears consider?

Bears were tested to the extreme last year. To stay on the short side of the EUR/USD pair on such a strong rally required a big account and a lot of pain for the bears. However, there is hope, as long as the rally does not exceed 1.25.

Furthermore, the correction of September and October, followed by the strong rally in November and December, gives the impression that the EUR/USD pair could form a head and shoulders pattern in this context. To do so, the market should strongly reverse the rally of the last two months of the previous year and consolidate around 1.16. If and when this happens, the bears will try to push the pair below the 1.16 level, which could serve as a vanishing line for the pattern.

Overall, this is a decisive year for the EUR/USD. On the one hand, there is a new US administration ready to take power in the US. On the other hand, both central banks are engaged in massive monetary easing. The technical perspective may be the one that offers a competitive advantage to traders.

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

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