EUR/USD Forecast – Early Bearish Signs Point to Lower Prices

EUR/USD Forecast Video for 23.12.22 by Bruce Powers

Earlier in Thursday’s session the EUR/USD triggered a bullish breakout above yesterday’s inside day high at 1.0645. It then headed higher and got close to the recent 5-day high of 1.0663 but was quickly rejected at 1.0659. Subsequently, the pair sold off dropping all the way through the prior days range to eventually trigger a bearish signal below yesterday’s low of 1.0590.

In summary, an upside breakout failed and then the pair fell all the way back down, through a range of possible support, to eventually trigger a bearish breakout. This is bearish price behavior as it shows a complete flip from bulls dominating to bears being in control within a single session. The bears should be rewarded in this case.

Bears Now in Charge?

Once a trend begins it tends to continue for some time. A move down may just be about to accelerate if there is further bearish confirmation.

A drop below yesterday’s low is just an early sign of weakening for the EUR/USD pair. Further bearish confirmation is needed for indications that it may keep falling. Next, watch for a drop below the low of the 5-day range at 1.0576, followed by a daily close below that price level. As the downtrend line has so far stopped a deeper correction, the line should be watch for support as well. The line will represent approximately 1.0552 tomorrow, Friday.

Bearish Rising Wedge – Will it Follow Through?

Supporting evidence for further downside is the rising bearish wedge that has formed in the chart for the EUR/USD. Think of it as a consolidation phase but upward sloping. It puts the EUR/USD at risk of a sharp decline if the selling anticipated by the wedge kicks in. So far that has not happened.

A bearish signal triggered last Friday on a drop below the upward sloping line across the bottom of the wedge pattern. But, since then the pair has gone sideways trading within a narrow range and has held above the support of the long-term downtrend line (previously resistance).

Alternative Scenario – Bullish

Another scenario that might unfold involves the downtrend line. Notice that within five days or so the EUR/USD will reach a price support zone where there is a convergence of the downtrend line, uptrend channel line, and 38.2% Fibonacci retracement level. Rather than breaking down, the EUR/USD could instead continue to trade above the downtrend line until it reaches that support zone where the chance for a rally looks to improve and negates the above bearish outlook.

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