Wedge Pattern Points to More Downside


Because of the wedge pattern, the pair will likely retest the support at 1.0640.

Bearish View

  • Sell the EUR/USD pair and set a take-profit at 1.0640.
  • Add a stop-loss at 1.0775.
  • Timeline: 1-2 days.

Bullish View

  • Set a buy-stop at 1.0755 and a take-profit at 1.0800.
  • Add a stop-loss at 1.0700.

The EUR/USD pair declined slightly as the outlook of the European economic outlook worsened. It dropped to a low of 1.0676, which was the lowest level since May 14th. It is still about 1% below the highest level in May.


EU Economic Outlook

The European Union’s economic outlook worsened on Tuesday after the bloc unveiled measures to gradually phase out Russian oil imports. The bloc’s countries will still receive Russian oil that flows using pipelines.

Perhaps, the most important restrictions were on oil shipping insurance since European companies have a strong market share in the industry. The bloc will ban its companies from insuring Russian cargo.

These announcements came on the same day that European countries published strong consumer inflation data. According to Eurostat, the bloc’s inflation surged to the highest level recorded. It blamed this trend to the soaring energy and food costs.

Therefore, the soaring inflation will put more pressure on the European Central Bank (ECB) as it considers rate hikes. Most economists expect the bank will hike interest rates by 0.25% in the July meeting and then exit negative rates in September.

The EUR/USD pair is also reacting to the relatively positive data from the United States. On Tuesday, data showed that home prices surged to a record level in March. The Case-Schiller house price index rose by 20% year-over-year in March. This signals that the housing market is still hot although signs of weakness have emerged.

Meanwhile, data by the Conference Board revealed that consumer confidence declined from 108.6 in April to 106.4 in May. This decline was better than the median estimate of 103.9. Focus now shifts to the upcoming jobs numbers that will come out in the next three days.

The US will release the JOLTs vacancies numbers on Wednesday followed by initial jobless claims and NFP on Thursday and Friday, respectively.

EUR/USD Forecast

The three-hour chart shows that the EUR/USD pair formed a rising wedge pattern that is shown in black. In price action analysis, this pattern is usually a bearish sign, which explains why it made a bearish breakout on Tuesday. The pair is still above the important support level at 1.0640, which was the highest point on May 5th.

The EUR/USD pair remains above the 50-period moving average. Therefore, because of the wedge pattern, the pair will likely retest the support at 1.0640.



Leave a Reply

Your email address will not be published. Required fields are marked *

Risk warning: Trading in Contracts for Difference (‘CFDs’) carries a high level of risk and can result in the loss of all your investment. As such, CFDs may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with CFD trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall we have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to CFDs or (b) any direct, indirect, special, consequential or incidental damages whatsoever. For more information about the risks associated with trading CFDs please find and read our ‘Product Disclosure’.

Please recognize that this website is the only official website, please do not enter other clone websites through Internet search or advertisements.

© 2011 - 2024 All Rights Reserved.