EURUSD: Don’t Get Caught Off Guard

by Justin Bennett  · 

February 23, 2023

by Justin Bennett  · 

February 23, 2023

by Justin Bennett  · 

February 23, 2023

The US dollar broke out from a multi-month descending channel on February 6th.

I’ve discussed that breakout several times here on the blog and in recent weekly forecasts.

Since then, the US Dollar Index (DXY) has carved higher highs and lows.

However, given recent developments, traders shouldn’t get too comfortable with their bias.

While the DXY is still in an uptrend, a potential rising wedge has developed from the February low.

DXY potential rising wedge
DXY 4-hour time frame

Rising wedges like the one above can signal fatigue from buyers.

But this is an unconfirmed pattern as confirmation requires a 4-hour and daily close below support.

If we look at the EURUSD, we can see the inverse of the DXY pattern above.

However, the euro’s structure is even tighter than the one above.

From the 4-hour time frame below, it seems EURUSD has to make a decision in the next 24 hours.

To be clear, the EURUSD downtrend is still intact as of now.

The same goes for the DXY uptrend.

But if these structures confirm in the coming days, it could signal a bullish reversal for pairs like EURUSD.

Key resistance for the euro is 1.0625. That’s the area bulls need to clear on a 4-hour closing basis.

Do that, and the EURUSD could turn higher toward 1.0780 and potentially 1.0850.

Alternatively, a higher time frame close below 1.0580 support will confirm the breakdown.

Either way, the wedge below is one to watch, as it could have significant implications for next week.

But I have to stress that this is not a call to long the EURUSD, as the downtrend is intact and the pair remains below the February 1st trend line.

It’s simply a heads in case we get a surprise move in the next 24 hours.

EURUSD potential falling wedge
EURUSD 4-hour time frame

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