EUR/USD Forecast: Euro Reversal Takes Shape Ahead of February Low
Euro Talking Points
EUR/USD trades defined range after climbing to a fresh monthly high (1.2170), but the exchange rate appears to have reversed course ahead of the February low (1.1952) as it breaks out of the descending channel from earlier this year.
Technical Forecast for Euro: Bullish
EUR/USD may track the monthly range during the last week of February as it struggles to climb back above the 50-Day SMA (1.2151), but the decline from the January high (1.2350) may turn out to be a correction in the broader trend rather than a change in behavior like the price action seen in 2020.
Keep in mind, the EUR/USD correction from the September high (1.2011) proved to be an exhaustion in the bullish price action rather than a change in trend following the string of failed attempts to close below the 1.1600 (61.8% expansion) to 1.1640 (23.6% expansion) region, with the Relative Strength Index (RSI) highlighting a similar dynamic as it broke out of the downward trend to recover from its lowest readings since March.
EUR/USD Rate Daily Chart
Source: Trading View
EUR/USD traded to a fresh yearly highs throughout December, with the exchange rate taking out the 2020 high (1.2310) during the first week of January, but snapped the opening range for 2021 following the failed attempt to test the April 2018 high (1.2414).
Nevertheless, EUR/USD has broken out of descending channel from earlier this year after failing to close below the 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion) region, with recent price action indicating that former trendline resistance may now act as support as the exchange rate appears to be reversing course ahead of the February low (1.1952).
Still need a break/close above the Fibonacci overlap around 1.2140 (50% retracement) to 1.2170 (61.8% expansion) to bring the 1.2220 (38.2% expansion) to 1.2260 (161.8% expansion) region on the radar, with the next area of interest coming in around 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion).
--- Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.