The EUR/USD pair price has been situated for the last 7 weeks within the huge Weekly bar printed during the Brexit poll 1.09 to 1.14 ~. This huge Weekly bar ended closed to its middle as a form of a stopping action (in this case, stopping action of the former bearish price action). It finally closed with an important sign of strength, above the Weekly important 50 SMA line (chart2, circled). This may give a hint that the last 7 weeks have been an accumulation. By the Monthly chart (chart1), the pair has been dealing for the 4th time with an important down trendline. For the Wolfe pattern fans, this trendline, connecting points 1 and 4 of a bearish Wolfe pattern seen on the Monthly chart since 2012 serves most of the time as a support if not a target for such a pattern. This time, it didn’t support the price at the expected target (circled) – at all, and the price continued to decline sharply in an oversold extremity.
Chart1: EUR/USD Monthly chart, showing the bearish Wolfe pattern since 2012, and the current price behavior regarding the trendline connecting 1 and 4 (at the courtesy of prorealtime.com)
The price has tested this line again by mid 2015 (from below), respecting it and declining further down, but reversed eventually in a HL. Since March 2016, the price has been touching this trendline each month, refusing to continue the bearish momentum down.
As for the coming week, taking out the High at 1.1234 (Weekly swing High) is a bullish setup to reach the Huge Weekly bar's High again (The High of last June at 1.1428), and can initiate a bullish corrective move, that eventually can reach the 1.2 area levels later on, in the following months.
However there are good chances for another week of consolidation, and taking out the Low of last Friday (1.1131) by the coming Monday (chart3) - is a bearish setup to reach the next support at the area of 1.1040 till 1.1090. Any delay of that break down (if happens) into Tuesday and the following days - is much less bearish.
Disclaimer: Anyone who takes action by this article does it at his own risk and understanding, and the writer won't have any liability for any damages caused by this action.
Weekly Price Action & Technical Analysis written by Gil Ecker, Market Technical Analyst and Trader, firstname.lastname@example.org