EUR/USD Technical Highlights:
- EUR/USD broke the downward trend but setting up bearish pattern
- Bear-flag may could trigger soon or take more time, signposts to watch
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Last month EUR/USD broke out of a downward channel in place for much of the year, but this in of itself didn’t mean the trend changed. It only meant we needed to consider a larger corrective rally, then perhaps a trend change if the right price action played out.
So far the price action is not looking good for the upside as a bear-flag is starting to come into focus. We may have seen the top of the recovery this week when the other day the EUR/USD inched above the high from a couple of weeks back.
But it is possible that the bear-flag pattern takes on some more upside before eventually triggering. This looks like the lower probability scenario at the moment. Either way, the lower trend-line of the pattern needs to be broken to trigger the sequence.
Furthermore, it is ideal to have the most recent low within the pattern broken to act as confirmation. In the event the pattern is ready to trigger that level is last week’s low at 9730. If, however, we were to see the Euro dip a bit lower from here and then pop higher again, another higher-low within the pattern would then be the lower-low to watch for confirmation.
When, if, the pattern does break a meaningful move lower is anticipated. The first obvious level to watch is the cycle low at 9535. Beneath there a run towards 9000 and lower is seen as likely, with the 2000 low around 82 as a key spot to watch.
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—Written by Paul Robinson, Market Analyst
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