Long-term Study on EUR/USD

Which Way Will EUR/USD Go Next?

This is an exciting time to follow EUR/USD. There is extreme volatility from current world events which keeps the currency exchange market moving. No currency pair is better than EUR/USD at creating repeatable patterns whether it’s trending or ranging, and, indeed it will do both. No one knows which way the EURUSD will go following the bold tap on parity that happened July 14, 2022. Was that the first crack in the ice, or is that a solid support level? It’s a great question. We can definitely make a fundamental case for price movement in either direction. Some say we have much lower lows coming; some say recovery has already begun and the USD will weaken.

Anticipate What Comes Next

Unless you have a crystal ball, it’s impossible to be right or wrong about something that hasn’t happened yet. But, you can identify repeatable patterns and anticipate repetition in price movement. I will put my best technical opinion forward with this long-term study. 

EUR/USD could go back to 1.1400 within the next 5 months.

Long-term Chart

Below is a monthly-time-frame chart showing EUR/USD at a low, having just tapped on 1.000 parity last month.

In the next image, I drew an Outside Range box around the extent of the anticipated range based on previous price movement. This is a mathematical strategy for analyzing where price has been and we can expect it to go next. In this image I’m noting that price has moved farther than the bottom of the box.

Just because price overshoots the bottom of the range, doesn’t mean it’s not still in the range. The nature of a range is to return toward center, which is why I anticipate EUR/USD reversing in the near future. The reason I know is because range patterns can take 30 bars of time to complete. It’s only been 12 bars of time since price was on the opposite side of the moving averages. Therefore, probability favors a return to the 50 simple moving average within the next 12 bars, even if an eventual down-trend happens after that. The beauty of this technical pattern is that I can anticipate it will happen within a specific amount of time. 

Long Term Studies Give You A Guide

No one knows if the market is going to reverse and head back to the middle of my range pattern, or carry on far below parity. I have a technical reason to anticipate a reversal which gives me an expectation about momentum and direction if the market does turn back. I won’t trade from this long-term chart.

Long time frame studies help me anticipate direction and timing for my shorter time frame trades throughout the weeks.

Over the next few months I’ll be watching for evidence of range behavior on the monthly chart. If the market does turn back it could be a rapid ascent to the moving averages.

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By the way, if you need help identifying trade setups, check out Jennifer's trading group. Before long, the patterns will be popping out for you, too!