- EUR/USD bearish W-formation remains is in focus in the build-up to US CPI.
- Bulls could find themselves trapped in trying to break out through recent highs.
EUR/USD is extending the bullish rally on Tuesday and has been trying to print a fresh high for this week's initial balance, taking the US Dollar down to 1.0759 vs. the Single Currency on the bull's quest for a test towards 1.0800.
However, as illustrated at the start of the week's technical analysis, EUR/USD Price Analysis: Breakout traders triggered long, bears looking to pounce, we have red news on the calendar on Thursday that marries up with a technically bearish fo5rmation on the charts as the following will illustrate. Bulls could be running into a trap and as analysts at Brown Brothers Harriman explained, who continue to believe markets are underestimating the Fed; ''it's hard to reconcile a risk rally with deep US yield curve inversion.''
EUR/USD technical analysis
In the prior analysis, it was explained that EUR/USD rallied towards a key resistance area but has started to slow in its ascent which leaves the focus on signs of distribution for the days ahead.
EUR/USD had reached up to test prior highs of 1.0736 and has moved into a critical resistance area as a potential last stop before the bears move back in. We have seen a bullish open for Tuesday but are yet to see a fresh high. Nevertheless, there is still time until Thursday's red news in the United States Consumer Price Index which leaves scope for a push towards 1.0800, although lacking a significant catalyst, this could be a tall order.
Zoomed in...
(Monday above, Tuesday, so far, below)
If the bears emerge below 1.0790, then the focus will be on signs of distribution again that will ultimately trap the breakout long positions.
The W-formation is supportive of such a thesis given that it is a reversion pattern. EUR/USD would be expected to revert towards the neckline and prior day's lows of near 1.0637. This could put the trendline support back under pressure and open the risk of a move below 1.0500 and on to test 1.0480, 0.0440 and then 1.0300 that guards 1.0290 and 1.0225 lower down.
In the meantime, bears will be on the lookout for the phenomenon of a sweep of the relatively equal highs towards, say, 1.0800, failures and a break of structure to the downside to change the character from bullish to bearish in the schematic. The lower time frames can be monitored for signs of buying exhaustion over the coming sessions. A long squeeze below 1.0750/36 could then be in order with US Consumer Price Index eyed as a potential catalyst on Thursday for this three-day set-up and potential bearish opportunity.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.