On Christmas Eve I wrote about a possible bullish pattern on EURUSD.
Since coming off the multi-year high in April 2018, the euro has carved what appears to be a falling wedge.
We viewed the structure on the weekly chart on Monday, but the daily time frame works just as well.
It was wedge resistance that capped the December 20th rally.
In fact, it was a combination of the 1.1450 horizontal level and wedge resistance which at the time was closer to 1.1480.
Fast forward to today, and the EURUSD is on the verge of breaking out.
You can see that falling wedge resistance is now at 1.1460. However, buyers also have to deal with the 1.1450 horizontal level.
As always, it’s going to take a daily close above 1.1460 to get the job done.
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You don’t want to attempt trading a breakout on the intraday charts. Even the 4-hour time frame is not enough here in my opinion.
A level this significant requires a daily close above it to confirm the break.
A daily and weekly close would be even better.
But as long as EURUSD trades below 1.1450/60 on a daily closing basis, the pair is vulnerable.
That said, I still think the price action since December 20th hints at an imminent breakout.
Whenever a market begins to hover just below resistance for an extended period, a breakout usually isn’t far away.
The GBPUSD is in a similar situation.
What interests me the most here is the 1,000 pip height of the wedge. Once broken, markets tend to traverse the same distance as the height of the structure.
That would put EURUSD just below the 1.2500 handle or about 1.2460.
I know many of you will find that difficult to accept. The euro has been weak for some time, and much of the rhetoric out there is bearish.
But as I wrote on Monday: thinking you know where a market is going is a dangerous business.
It’s better to let the market do the talking. And right now, EURUSD is signaling it wants to move higher if 1.1460 resistance falls.
A daily close above 1.1460 would expose 1.1530 followed by 1.1620.
Alternatively, a failure to close above 1.1450/60 would keep the single currency under pressure in the short-term.