After a volatile couple of sessions, EUR/USD is back at a major area of interest on the charts, taking a breather ahead of potentially more volatility ahead.
Is this an opportunity for breakout traders to grab some pips, or will the markets continue to chop around a strong area of interest for the rest of the week?
EUR/USD 1-Hour Forex Chart by TradingView
It’s been a bit of a wild ride for EUR/USD this week, first poppin’ higher like rocket on Monday, which was then brought quickly back to Earth the next day thanks to net negative Euro area sentiment.
This is much more calmer, likely due to the fact that there are big volatility events ahead for both the euro and USD coming soon, but also likely due to the market currently trading around a slew of technical arguments for both the bulls and the bears.
On the one hour chart above, we can see the market back to riding the 200 simple moving average, as well as this week’s Pivot Point, and a rising ‘lows’ trendline that actually goes back to the beginning of October.
All of these arguments could draw in technical buyers looking to play the current uptrend, especially with one more technical setup in sight, the divergence between the falling ‘lows’ in price this week vs. the higher ‘lows’ on the stochastic indicator.
Of course, where the price goes next will be up to the fundie scenarios ahead, but if that is in favor of the bulls, then EUR/USD may move as high as R1 – R2 pivot resistance area before buyers run out of steam, based on the daily ATR of around 70 pips.
Now, if the fundies push EUR/USD lower, technical traders will likely see a break of that confluence of several technical arguments, likely prompting breakout sellers to jump in, likely followed by break-and-retest players and possibly bulls covering their long positions.
A momentum move lower could take the pair as low as the last major swing low area (roughly 1 daily ATR from current prices), which also happens to be around the 1.0500 major psychological level, before sellers run out of steam and/or fresh buyers jump in.
Again, it’s the news headlines, economic data and market narratives that will determine who wins out between the bulls and the bears, so it’s probably a good idea to keep up with market flows by checking out our Daily News and Watchlist posts, economic calendar and Event Guides before picking a bias and working on your risk management plan!