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Forex Analysis – EURUSD
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The weekly EURUSD chart for last week showed a bear bar that closed near the previous March 2020 and June 2020 significant price action levels. The EURUSD is likely to dip below one or more of the breakout points of last year’s strong rally before the bear trend ends, they were the March 9, 2020, high at around 1.15 and June 10, 2020, high at around 1.14.
The EURUSD is expected to trade at least slightly lower this week since last week closed so bearish. Bears will continue looking for a sustained break below the June 2020 high and with momentum, they are likely to remain in control.
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A lot is being made of the 7-year cycle as the EURUSD and many other securities would appear to have major inflection points every 7 years or so. The most obvious was the peak in the EURUSD around July 2008, before the waterfall down to 2015. Prior to that, 2001 was the start of the rally from below parity to the 2007-2008 highs. If there is an inherent cycle that is 7 years long, 2022 could be a significant turning point in the history of the EURUSD.
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Following on from the US CPI print that caused the fixed income yields to rise and give the US dollar strength, the EURUSD has broken out of a small area of balance created in October 2021 and is now entering the June – July 2020 balance zone. Because a lot of trading would have been conducted at these levels back in 2020, there is a real possibility that some bulls are lingering, or that new bulls feel somewhere around 1.13100 offers some relative value.
Also, a 6-month descending channel is more likely to break to the upside rather than accelerate to the downside. The daily 20, 50 and 200 EMA’s are signalling for further downside pressure as momentum usually leads price action so for them to flatten off, we could be in for a period of consolidation, before a reversal.
The ActivTrader Sentiment Indicator is also signalling that 77% of retail traders on the platform are bullish the EURUSD, so there is also a high probability chance that we take out another couple of daily swing lows to test their resolve and account balances. When this reading goes neutral or bearish, I would then expect to see a rally to breakout the channel.
