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The EURUSD pair has started to pullback after hitting above the 1.0400 level earlier this week, however, market data shows that a bearish consensus is building amongst traders.
With this in mind, the EURUSD is looking even more technical strength and I would expect that the pair is headed towards the 1.0400 level and the US dollar index to continue to slide.
Other factors are currently weighing on the EURUSD pair, such as geopolitics. The recent missile that landed in Poland has certainly had an effect on the euro currency and the market.
Still, I think a recovery could be coming soon as the technical are very good in the near term. Bullish patterns are engulfing the lower timeframes current.
I suspect the scene has been set for a new price trend if bulls can continue to defend the 1.0300 level. I doubt the euro will go down to parity if the Fed are starting to slow rate hikes.
The ActivTrader Sentiment tool suggests that only 23% of traders are bullish on the EURUSD. This is still very positive for bulls if we consider that 77% of traders are short.
As traders, we typically look to fade retail sentiment when it is overly skewed in one direction. This style of trading, fading sentiment, has been one of the most effective and used tactics of hedge funds.
The EURUSD is currently showing a large, inverted head and shoulders pattern. The size of the pattern would indicate that a short-term bottom could be nearing around the 1.0500 area.
This is a bullish chart for the EURUSD over the short-term. This pattern is actually projecting a move of around 1,000 points.
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According to the daily time frame, the pair is trapped in a large falling price channel and has projection for the EURUSD around the 1.0700 level also at the top of the channel.
As long as the EURUSD pair stays above the 1.000 price level then medium-term analysis shows that further strength towards 1.0700 is possible.
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