The following is the weekend recap and looks at a longer term analysis of the EUR/USD than what is covered in the analysis I post each day in the Daily Outlook.
The pair made a definite effort to break to the upside. Shorts in the EUR are very high and a “short squeeze” could occur if the pair manages to get above 1.3800. In addition to this, the daily downward trend was penetrated on Friday, but closed just below it.
Targets are now in sight on the upside at 1.4030 and 1.4170. A short-term upward trendline is now in place as can be seen on the chart (below). A break above 1.3800 as well as the daily downward trend line makes a re-test of the lows near 1.3440 a low probability possibility in the near term.
The pair closed at 1.3767 (or close to it) and the weekly average movement is about 300 pips. This put our first target within reach, but the second target is beyond what the typical movement would indicate for this week.
On the downside, old resistance will is now likely to act as support at 1.3700. Occasionally I mention a “confirmed breakout”. In this case a confirmed breakout is when the pair pulls back after a breakout (as it has done) and respects a primary support level (1.3700 in this case) and then pushes higher again. If you think in terms of a trend, this set-up creates the initial stages of a trend – higher highs and higher lows. We do not always get “confirmation” though as sometimes the market does not pullback to near the breakout point.
Further support comes in at 1.3600 which is our short-term daily upward trendline and also at 1.3540. Beyond this key support is at 1.3440 or the range lows.
Also of note is the “bowl” formation we can now see from the daily price action between early February and now. This also indicates an upward bias.
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EUR/USD Daily - FreeStockCharts
Cory Mitchell, CMT
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