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EURUSD: Nothing Has Changed, and That’s Scary

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On September 3, 2015, I released commentary on the EURUSD that attracted quite a few skeptics, to say the least. I’ll admit, it wasn’t exactly a range trade idea. Instead, I was building the case for a 2,900 pip drop (at the time).

The title of the post says it all:

Parity for EURUSD? How About 0.8225, Instead?

Now that more than a year has passed, one would assume that this idea is dead in the water. After all, the single currency has gone nowhere fast since early 2015.

But in my opinion, the lack of movement has only managed to agitate an already uncertain market. This is because the longer a market consolidates, the more volatile the ensuing breakout is likely to be.

This notion is especially prevalent in the wake of the Euro’s 3,500 pip decline against the US dollar between May of 2014 and March of 2015.

Perhaps the more startling chart from the September 2015 commentary – and the one that received the most attention – was the bear flag pattern you see below.

eurusd-bear-flag-objective

Notice how the measured objective comes in at 0.8225, which is congruent with the 2000 low.

If I draw that same price structure on today’s chart, you can see where the pair respected former channel support as new resistance in February and May of this year.

eurusd-new-resistance

Note that prices are still holding below former support on a weekly (and daily) closing basis.

And even if we make the argument that the last nineteen months of price action has carved out a shallower bear flag, the result is the same.

The monthly chart below tells the story.

eurusd-monthly-chart

So you see, although nothing has changed since September of last year, the signs still point to a potentially scary outcome.

It also seems that others are beginning to take an interest in the 2000 low at 0.8225. On Monday Citi released their longer-term forecast for the EURUSD based on the weekly and monthly charts.

Here is an excerpt from that analysis:

The final level of note as an extended target (Not our base case at present) would be the low posted in 2000 just above .8200.

All of this should make for some interesting price action in the coming months and years. But until the pair can break free from the current range between 1.0500 and 1.1600 we aren’t likely to see much follow through one way or the other.

With that said, I remain bearish in the near-term per the October 14th breach of wedge support. Key resistance for the pair lies just above current prices at 1.0950 while sellers are likely to encounter bids near the March 10th ECB low of 1.0820.

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eurusd-technical-break

Leave a Comment:

4 comments
Adrian Kasanoi says

Hi, Your analysis is always spot on. I have a doubt, patterns like flag, pennant etc. are short term reversal patterns isn’t it, I mean these can be reliable on daily and below time frames. But can we trade these on weekly and monthly time frames? Thanks for your time. Regards.

Reply
    Justin Bennett says

    Hi Adrian, flags and pennants are typically continuation patterns. As for time frames, I’ve found that they’re more reliable the higher you go, it just takes longer for them to play out.

    Reply
Marc says

Brilliant stuff Justin, I really enjoy your work and your content you are delivering. Especially with EURUSD I am totally on your view. Interested to see your AUDUSD longterm chart. Do you have 0.60 on your cards too?

Reply
    Justin Bennett says

    Thanks, Marc. That doesn’t seem out of reach for a longer-term view of the AUDUSD.

    Reply
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