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Navigating EUR/USD: the final push and the patterns that could shape 2024

Alejandro Zambrano Alejandro Zambrano 21/12/2023
Navigating EUR/USD: the final push and the patterns that could shape 2024 Navigating EUR/USD: the final push and the patterns that could shape 2024
Navigating EUR/USD: the final push and the patterns that could shape 2024 Alejandro Zambrano

It's been a week since the EUR/USD pair last saw significant volatility. With the holiday period commencing in a mere 24 hours, it's hardly surprising that market activity has decelerated. Yet, charts hint at a potential last surge from Euro bulls. Since 10 am GMT today, the USD has weakened against the Euro, British pound, Australian dollar, and all its major counterparts. This coincides with a rise in Gold and a partial recovery in stock indices from yesterday's losses, signalling a bullish sentiment. 

 

Despite the bullish mood, this trend might quickly dissipate from a technical standpoint unless the price surpasses the November 2023 high of 1.1017. Conversely, a successful breach of this level could sustain the rally. The impetus is mainly technical, but it's underpinned by the macroeconomic scenario of the Fed's anticipated rate cuts, months ahead of the ECB, bolstering traders' bullishness. 

 

In the immediate term, the EUR/USD has crafted an inverse head and shoulders pattern, with the price now etching out the right shoulder. A break above 1.1017 would activate this formation, potentially driving the price to as high as 1.1278. 

 

Looking back over the past 12 months reveals another emerging pattern: a large wedge formed in 2023. This pattern is outlined by a descending trendline connecting the July and November highs and another trendline linking the March and October lows. A breakthrough to the level above also confirms this wedge pattern, suggesting that breaching 1.1017 might propel EUR/USD towards 1.1650. However, it took a year for this pattern to develop, so reaching the target could take equally long. 

 

So, will traders experience a surge of volatility before the year concludes? They'll need to exert considerable effort, mainly as the market winds down for the holidays, with FX reopening at 22:00 London time on Monday. And with the New Year's celebrations soon after, trading is expected to be subdued. Nonetheless, keep an eye on these patterns; they will continue influencing EUR/USD as we enter 2024. 
 

EUR/USD daily chart 

 

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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