EUR/USD Forecast – Recent Uncertainty Fails to Deter Uptrend

EUR/USD Forecast Video for 29.12.22 by Bruce Powers

Intraday Broadening Formation Expands

In technical analysis the broadening formation is generally considered to be a reversal pattern. It is a consolidation where the pattern is widening over time as the high-to-low of the range expands going forward. It is shaped like a megaphone with trend lines drawn across the top and bottom borders of the pattern heading away from each other.

A broadening formation has formed intraday in the EUR/USD near recent trend highs following a 12.6% advance off the late-September low. Resistance of the trend was seen at the 61.8% Fibonacci retracement level with a trend high of 1.0736.

A slight expansion to the upside occurred in the developing formation Wednesday as the EUR/USD rose briefly above Tuesday’s high and then quickly reversed. Until the pair gets out of this pattern dynamic, choppy back and forth price action is likely to continue.

Closing in On Key Pivot Area

As the EUR/USD moves forward in time while staying within a relatively tight range, it gets closer to what could be the next key pivot area. A price zone is identified where the uptrend line, downtrend line, 38.2% Fibonacci retracement, and 21-Day EMA converge. It consists of a range from around 1.0548 to 1.0526 and is marked with a green rectangle on the chart. The intersection of the two trend lines will be reached in three trading days.

It is a sign of weakness If price falls below and closes below any of the line measurements noted above. Nevertheless, one sign of weakness may not be enough for a signal but when combined with other evidence at the time should offer further insight into what could be coming next.

Signs of Strength

Signs of strength will start to be seen on a daily close above last week’s high of 1.0659. A bullish trigger occurred this week on a break above the weeks inside range, but so far there has been no upside follow through. A new bullish trigger above the high of the inside week can be used for a sign of strengthening.

Bull Trend Remains Intact

Until there are further signs of weakening the uptrend remains intact. There is a series of higher swing lows and higher swing highs in the chart, plus price remains above both the 21-Day EMA and 200-day EMA trend indicators.

The only bearish signal seen recently is breakdown of a rising bearish wedge (see rising dotted blue line). A rising wedge is a classic bearish reversal pattern in technical analysis. However, in this case the break was followed by sideways price action above key support levels. This puts the pattern at risk of failure unless there are new bearish signals. Failure being an upside move rather than lower prices.

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