I have been writing regularly for a couple months that EUR/USD would probably have to fall below the Mar. 9, 2020 high. That is because it has been in a trading range for 7 years and when in a trading range, a leg up usually begins after falling below support. That high was the breakout point of last year’s strong rally. It is therefore important support and a strong magnet. EUR/USD broke below it last week.
I also said that the selloff might continue down to below the June 10, 2020 high, which is a less important breakout point. Since the pair has already done the minimum, there is now an increased chance of a reversal up at any time.
Last week’s big bear day was a strong enough Surprise Bar for traders to expect at least a small second leg down. EUR/USD will probably fall below the June 10, 2020 high because the momentum down is strong and that price is almost exactly a measured move down from the October trading range.
There is only a 30% chance that this year’s bear trend will continue all of the way to the bottom of last year’s rally or below the bottom of the 7-year range. However, if the bears continue to form bear bars on the weekly and month charts, that probability will go higher. While the selloff should go a little lower, there is better than a 50% chance that there will be a 1- to 2-month rally from around where EUR/USD currently is, or from around the June 26, 2020 low, which was the first pullback from last year’s breakout of the triangle bottom.
With important magnets just above 1.14 and the momentum down strong, the odds favor at least slightly lower prices over the next couple weeks.
Since major currency reversals have an increased chance of beginning at the start of a year, the selloff might continue through December.
