EUR / USD Technical Features:
- EUR / USD is starting to break out of a wedge pattern
- The rupture comes after a false rupture to the upper side
- Sales are seen as leading to new cycle lows, 11000
The EUR / USD has been in the process of tearing down a two-month wedge pattern. The bearish signaling doesn’t come without some noise, though, as we saw a false break to the upside during the middle of the month.
The idea of fake explosions before finding the intended direction is something we have been discussing several times in recent weeks. This one seems to be the real deal, but if it isn’t, then the two entry rule will be implemented; that is, no more than two entries in an arrangement to prevent hacking. In this case, the wedge triggered higher (failed) and now started to the disadvantage.
Giving the current break the benefit of the doubt, the EUR / USD looks poised to break near levels and trade down to a recent cycle low below 11186. However, the thinking is that this will not be all we get out of the euro. move. The 11000 area is large, and not just because it is a round psychological level.
There is a trend line extending from the early days of the euro’s existence. The swing low of 2000 is linked to lows posted in 2016 and 2020. If the euro were rebuilt using its components (mainly the Deutschemark) the trend line would extend back to the late 1980s.
This line is starting to look like a magnet and with it less than 300 pipes away it is not very stressful to think that it will be tested soon. We want to pay attention to this long-term support threshold as the macro landscape changes.
Daily Chart EUR / USD
Monthly Chart of EUR / USD
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— Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX