Over the weekend I hinted at a large wedge pattern on EURUSD.
I figured I’d wait for the new year to comment on it further. However, I’m not so sure the market is going to wait.
Now, I want to start by saying that the trend is still bearish.
That will continue to be the case until buyers can clear the 1.1450/70 resistance area on a daily closing basis.
I mentioned this horizontal zone last week. But what I didn’t show is the long-term trend line that intersects with this level.
Under most circumstances, 1.1450/70 would be an area to sell from.
However, a view of the 2018 price action hints at a very different path for the euro.
The falling wedge in the chart below could signal a turn higher for EURUSD in 2019.
In fact, it suggests much higher prices.
The height of the wedge is 1,000 pips, so the objective for a break higher would be just below the 1.2500 handle.
I’m sure many of you are shaking your head in disbelief.
The euro is weak, and will continue to be weak, right? There’s no way the currency is going to rally 1,000 pips in 2019.
But the truth is that nobody knows where EURUSD is going.
Over the years I’ve learned that the strongest moves often begin when the market as a whole is least expecting it.
Look no further than the 1,000 pip decline in 2018.
If I had told you the EURUSD was going to lose over 1,000 pips when everyone was bullish back in April 2018, you probably would have been skeptical then too.
My point is that 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 that the 2018 selloff may be nearing an end.
But as I wrote last week, bulls have more work to do.