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The EURUSD is still hanging tough around the 1.2200 level despite a series of bearish risk-events looming over the pair into the Christmas holiday period. Traders are still downplaying the risk of a no-deal Brexit and President Trump potentially rejecting the latest stimulus bill for the United States economy.
Traders are naturally cautious towards shorting the EURUSD, as the pair has been quickly recovering on price dips. This Monday’s fall towards the 1.2130 area and subsequent rise towards the 1.2240 area is a clear case in point.
Should we see the United Kingdom leaving the EU without a deal over the coming weeks, and President Trump fails to sign the stimulus bill, then traders and investors may be forced to reprice the EURUSD.
The prospect of a no-deal Brexit, and other EU nations following the UK is one the biggest risk factors for the euro currency next year. Should a deal be agreed, then the EURUSD pair could also experience a quick pop higher towards the 1.2330 to 1.2500 price range. This may be what traders and investors are waiting to see before committing to either the bull or bear side.
One other component that traders need to see is a resurgence in confidence towards the greenback. A potential Biden Presidency has not been viewed as being positive for US Dollar. In reality, traders will need to see a broad based move into the US dollar currency for the bear party to really get started in the EURUSD pair.
What we may be seeing is a waiting game until the outlined risk events have played out. In mid-January the market also has another risk event to worry about, the inauguration of a new US President. The next few weeks will certainly be interesting for EURUSD traders.
EURUSD Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that a bearish head and shoulders pattern will form if the EURUSD pair drops towards the 1.2060 level. In the near-term, bears need to hold the price under the 1.2130 level to increase technical selling towards the EURUSD.
According to the size of the potential bearish pattern, the EURUSD pair could drop towards the 1.1850 technical region if a sustained breakout below the neckline of the pattern, around the 1.2060 level, does take place.
Source by ActivTrader.
To the upside, sustained gains above the 1.2240 area would probably encourage bulls to test towards the current yearly high, around the 1.2280 region. Should we see a break above the 1.2280 resistance level, I would expect the EURUSD to test towards the 1.2330 level, and potentially the 1.2500 area.
EURUSD Medium-Term Technical Analysis
Technical analysis on the daily time frame shows that a large rising wedge pattern in view, with a bearish breakout from the wedge in play while price trades below the 1.2190 resistance level.
According to the size of the rising wedge, the EURUSD pair could drop towards the 1.1640 support region if the pattern reaches its full downside projection. According to what happens on a fundamental level, this may present a chance for traders to buy the EURUSD pair, in expectation of a coming recovery back to the 1.2500 region.
Source by ActivTrader.
Traders should also note that a massive inverted head and shoulders pattern will form if the EURUSD pair reaches the 1.2550 level over the medium-term horizon.
This potential bullish reversal pattern holds a massive upside target of around 2,000 pips, which would eventually take the EURUSD pair towards the 1.4500 handle.
