EURUSD bulls are probably cheering the latest move higher in the single currency. Helping them was the latest Federal Reserve rate meeting which dampened FX trader’s expectations of early interest rates hikes. Yet, the short-term victory of Euro bulls means that the EURUSD pair will probably trade sideways for much longer.

EUR/USD volatility should continue to subside

For a little while, it looked like the EURUSD was about to trade below the 2021 low of 1.1705. But the price traded only as low as 1.1749 in the last 30 days. It was not enough to trade below 2021 low and embark on a downtrend we have seen in AUDUSD.

Today, as the dust is settling, it looks like neither the recent month’s strong US data and inflation figures nor the ECB’s willingness to allow an overshoot in the Euro area inflation was enough to sink EURUSD.

The price is instead drifting higher again and trapped in what looks like a triangle pattern. The downward sloping trend line goes via the January and May highs, whilst an upward-pointing support line drives through November 2020 and July 2021 lows.

The triangle pattern suggests that the EURUSD might be trading at 1.22 by September 2021 if the speed of the latest up leg is similar to the price gain between March 30 and May 25.

For some, trading the inside of a triangle is the best there is, and the move to the 1.22 target in EURUSD will remain in play as long as the price trades within the triangle pattern and the March low of 1.1705.

For me, a breach to either side of the triangle is more interesting. A break to the triangle at 1.22 suggests EURUSD might reach 1.2773, whilst a break to the trend line at 1.1749 suggests a drop to 1.12

EUR/USD Weekly Chart


High-risk investment warning: Trading Foreign Exchange (Forex) and Contracts for Differences (CFDs) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Any opinions, news, research, analysis, prices or other information contained in this presentation is provided as general market commentary and does not constitute investment advice.

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