EUR/USD Stays Stuck in Narrow Range

EUR/USD Forecast Video for 23.01.23 by Bruce Powers

For the past six days the EUR/USD has been contained within a relatively narrow range from a high of 1.0887 to a low at 1.0766. An expanding triangle consolidation pattern has formed during this time as the price range is expanding over time rather than contracting. Lines across the top and bottom borders of the pattern are pointed away from each other. Contraction of a price range is common in many consolidation patterns.

Bullish Outlook Retained

Nevertheless, the overall outlook for the EUR/USD remains bullish. The pair is still progressing within a rising trend channel and the retracement off the recent high has been shallow, at less than a 38.2% Fibonacci retracement. This indicates that buyers are still aggressive enough to hold up the price. Once the short-term correction is over, that underlying strength should reveal itself and help increase demand.

Short-term Correction Is Welcomed

Given that trend support is not too much lower, a short-term pullback off the trend high can provide a better place to build a position and prepare for the next advance into new trend highs. Support at the uptrend line is around the 50% trend retracement at 1.0685. Then, the 34-Day EMA is at 1.0642. That lower price if reached would only happen on a drop below the uptrend line.

Key Support Zone

Notice that by January 27 (see vertical line), the EUR/USD will reach a price area where there is a confluence of several lines all marking the same potential price support zone. Lines include the uptrend line (lower channel line), 38.2% Fibonacci retracement, and the lower line from the expanding triangle formation. Together they create a strong support zone. If the pair hasn’t broken below the lower line of the triangle or rallied above the top triangle border before then, a rally should occur once hit or shortly thereafter.

Upside Target

There are several upside targets derived from price structure and Fibonacci levels. However, today we are going to look at a target from a potential measured move. A measured move is where the second leg of a trend matches the price move of the first leg. The first leg up for the EUR/USD is off the most recent swing bottom at 1.0482, with a distance traveled of 405 pips. When projecting that price distance from the beginning of the second leg up at 1.0766, we arrive at a target of 1.1171. What would chance this projection is if the current pullback low drops a little further.

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