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EURUSD Technical Highlights:

  • Euro daily key-reversal, 4-hr pattern suggest weakness
  • Expectations remain low for price movement, but that will change

Check out the Euro Q1 Forecast to see our analysts’ intermediate-term fundamental and technical outlook.

Euro daily key-reversal, 4-hr pattern suggest weakness

On Thursday, EURUSD abruptly reversed, creating a key-reversal on the daily chart very near trend-line resistance. Furthering along the reversal was the break of the rising wedge pattern off the February low. The combination of daily and 4-hr signaling gives shorts a compelling case.

Next week should bring some downside follow-through with the low at 12234 initially targeted, followed by just beneath there the November low at 11216. In the event we see a rally above the Thursday high the picture won’t turn positive yet despite negating the reversal bar and bearish wedge break. Trend-line resistance will still need to be cleared, and even if that happens low volatility has made extended moves in either direction unsustainable.

Traders are relatively flat EURUSD, see the IG Client Sentiment page to find out how changes in positioning can act as a signal for price direction.

EURUSD Daily Chart (Key-reversal)

EURUSD daily chart

EURUSD 4-hr Chart (Wedge-break)

EURUSD 4hr chart

Expectations remain low for price movement, but that will change

Volatility continues to be low and expectations for out-sized moves in the near-term remains tempered. There is reason to be optimistic, though, that volatility is on its way. The 6-month range in the Euro is at a historical extreme, with only a few prior periods matching similarly tight trading conditions as to what we are seeing now. These periods of low volatility don’t last forever and are followed by big shifts.

However, while a sizable uptick in volatility is anticipated, it’s a macro-view, and as such the timing of when conditions will change is yet unclear – it could begin next week, it might not start for several months. With that in mind, we must continue to take the market at face value for what it is today but recognize that at some point outsized volatility will bring with it a better trading environment.

EURUSD Monthly Chart (6-mo range at historical extreme)

EURUSD monthly chart

Helpful Resources for Forex Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

Other Weekly Technical Forecast:

Australian Dollar Forecast – GBPAUD Eyes Brexit Referendum Levels. AUDUSD, AUDJPY May Breakout

Oil Forecast– Trump's Tweet Sees Bulls Rush In

British Pound Forecast – GBP Slipping But Still Positive

US Dollar Forecast – Dollar Forces EURUSD Break of Least Resistance, Other Crosses Loaded