Past performance is not indicative of future results. All historical data, including but not limited to returns, volatility, and other performance metrics, should not be construed as a guarantee of future performance.
EURUSD 1-Hour timeframe
The EURUSD on an hourly timeframe has steadily decreased since the high created on 17/07/2024 at 1.09479.
At first, the market made a fairly rapid decline, followed by four days of consolidation.
Two days ago, the market broke out of this consolidation when it breached the 1.08811 support level, just to decline and form an inverted head and shoulders pattern.
The moving averages confirm the current downtrend, whereas price action suggests a short-term consolidation with an inverted head and shoulders pattern that formed.
We also have a strong shooting-start candlestick pattern on the neckline, which is also the 1.08521 resistance level.
Although it might sound like the jargon of mixed signals, from a technical point of view, it simply means that there is a higher probability for a strong breakout in either direction. Fundamentally this is also confirmed by means of the upcoming core PCE print at 12:30 (UTC) on Friday 26 July, which could cause massive swings in either direction.
Hence, from a technical and fundamental approach, we anticipate a strong breakout, especially after a time of consolidation, as we currently see.
If price manages to break the neckline (1.08521) to the upside with conviction, we might see prices reach 1.08811 (or the 200 period SMA) and even 1.09124.
However, if the neckline stays intact and the market continues its downtrend after the rejection of 1.08521, we might see prices fall as low as 1.0800 and even 1.07717.
These breakouts can be especially violent if their timing aligns, or at least, closely aligns with the upcoming PCE print. Especially if the PCE print comes in lower than expected, the market might perceive this to mean a greater chance for a US rate cut.
However, keep an eye out for shifting investor sentiment and global risk themes.
Summary:
- EURUSD has steadily decreased since reaching a high on July 17, 2024.
- After a sharp decline, the market consolidated for four days.
- Recently, the market broke the 1.08811 support level and formed an inverted head and shoulders pattern.
- Moving averages confirm the current downtrend, while price action suggests short-term consolidation.
- A strong shooting star pattern at the 1.08521 level signals a potential breakout.
- Upcoming PCE data could lead to significant market swings, increasing volatility.
