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EUR/USD Closes Below May 31 Low: What's Next?

ByAl Brooks
Published 09/26/2023, 09:30 AM
EUR/USD
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EUR/USD-Daily Chart

  • The EUR/USD closed below the May 31st low for the first time. This indicates that the bears are getting a successful breakout below the May low.
  • However, the bear channel is climactic and has not touched the moving average for 17 bars. This is also happening late in the selloff that began back in July.
  • Although the bear channel is climactic, it is also tight. This increases the odds that the first breakout above the channel will fail.
  • The bears are trying to get a bear breakout below the bear channel and major support. The odds are that yesterday’s bear breakout will probably fail, leading to a trading range.
  • It is important to realize that the bear channel that began in July is a breakout on a higher time frame, such as the monthly chart.
  • The monthly chart formed a bull breakout of a bear trend ending in July 2022. The bulls likely need a credible major trend reversal to transition the monthly chart into a bull trend. This means the EUR/USD could fall back to 1.0000 before the buyer arrives.
  • Overall, while the daily chart is in a tight bear channel that is a breakout on a higher time frame, the daily chart will likely begin to go sideways for several days and develop into a trading range. Traders will probably disappoint the bears and try to reverse and test yesterday’s high and the moving average.

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