EUR/USD Chart Analysis: Pair Rebounds from the Year’s Low

Analysing the EUR/USD chart five days ago, we:

  • → constructed a downward channel, noting signs that the bears remained in control;
  • → outlined a scenario in which the rate would decline to a new yearly low (and test the lower boundary of the channel).

Yesterday’s price action confirmed these assumptions – the low at H is below the low of 3 February (F), refining the lower boundary of the channel. At the same time, the sharp upward reversal (shown by the arrow) indicates increasing demand, driven by a shift in sentiment due to several factors, including:

  • → Trump’s speech, in which the president stated that the war in Iran is progressing successfully and that he has contingency plans for any scenario. This cooled demand for the USD as a safe-haven asset.
  • → Expectations of US inflation data scheduled for release tomorrow.

Technical Analysis of the EUR/USD Chart

Recent developments mean that the previously formed sequence of lower extremes A–B–C–D–E–F has been extended with new turning points G and H. However, the EUR/USD chart suggests that this sequence has already been disrupted.

Note that:

  • → the price has confidently recovered after yesterday’s bearish gap at the market open;
  • → the drop below the F low near the 1.1530 level was extremely brief (a sign of a bullish Liquidity Grab pattern);
  • → the market may be sensing the proximity of the psychological 1.1500 level.

Moreover, demand-side forces are today attempting to push the price into the upper half of the channel. Therefore, forex traders should not rule out the possibility of a further recovery in EUR/USD from the fresh yearly low. In this case, former support levels at 1.1680 and 1.1750 may act as resistance to further gains.

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