Uneventful Day for the EUR/USD as it Trades Inside Day

EUR/USD Forecast Video for 05.01.23 by Bruce Powers

EUR/USD is on track to complete an inside day on Wednesday. An inside day is a form of consolidation as volatility dies down following expanded volatility. On Tuesday volatility was high as the EUR/USD triggered an inside day breakdown to fall 1.09% for the day. That’s the largest one day drop in at least two months. At the same time a double top bearish reversal pattern triggered on Tuesday.

Tuesday’s Damage May Need Longer Recovery

The decline broke through several nearby support areas to eventually get rejected at a low of 1.0519. That low is at the confluence of both the uptrend line, downtrend line, and 38.2% Fibonacci retracement of an internal uptrend. In other words, it could be an important low and certainly if broken to the downside points to further selling for the EUR/USD. However, let’s also put the 34-Day EMA, currently at 1.0504, into the support range as it is not too much below the pullback low at this point.

Watch Moving Average Support Zone

You can see from the enclosed chart how the 34-Day line, in purple, is being approached for the first time since price went above it back in early-November of last year. It should hold as support for the trend. If it does not then next watch for the 50% Fibonacci retracement at 1.0479, followed by a double top target at 1.0410, to be reached.

Each of events noted above from Tuesday is bearish and typically will lead to further selling. Conversely, bullish indications remain as the pair is holding above its long-term downtrend line, 34-Day EMA, and a short uptrend line. It has only been above the downtrend line for 16 days and continues to recognize the line as support since then.

Signs of Strength

Signs of strengthening will next be seen on an advance above Wednesdays inside day high of 1.0635, and further on a close above it. The most recent swing high is at 1.0713. Price would need to breakout above that high to give a daily signal that points to further upside, as that would be the first sign of a bullish trend continuation.

Following the May 2021 high, the EUR/USD trended lower for 16 months, until September last year. A bullish reversal of that downtrend only started in October. Therefore, the uptrend is still new and may have more upside to go. As of now, corrections can be watched for new entries to take advantage of a continuation higher, if it is to come.

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