EUR/USD 4H Analysis: Rising Wedge and Emerging Triangle PatternOverview:
EUR/USD on the 4-hour chart has experienced a bearish breakdown from a previously formed rising wedge pattern, followed by a retest of the broken support now acting as resistance. The price action is currently consolidating into a new triangle pattern, suggesting potential indecision or a continuation move.
Technical Indicators:
- Trend : After breaking down from the rising wedge, EUR/USD briefly retested the broken trendline as resistance. The price action is now consolidating into a triangle pattern, indicating a potential continuation of the bearish trend or neutral consolidation before the next move.
- RSI (Relative Strength Index) : RSI is near neutral levels, reflecting the current consolidation phase.
- Volume : Volume has decreased during the formation of the triangle, which is typical in consolidation phases and may precede a breakout.
Key Levels :
- Resistance : The top of the triangle pattern is at 1.1195, which is also the highest point of the previous rising wedge pattern.
- Support : The lowest point of the triangle pattern is at 1.0956.
Potential Scenarios :
1. Bearish Continuation : A break below the lower boundary of the triangle at 1.0956 would suggest a continuation of the bearish trend initiated by the rising wedge breakdown. We are more inclined towards this scenario given the prior breakdown and retest behavior.
- Entry : Consider short positions on a confirmed break below the triangle support at 1.0956. Alternatively, it is possible to enter now at 1.1085, given the bearish inclination and current price level.
- Stop Loss : Place a stop loss above the recent highs within the triangle or near the triangle's upper boundary.
- Take Profit : Target lower support levels at 1.09500 and 1.08000, which are indicated on the chart, aligning with prior swing lows or significant Fibonacci levels.
2. Bullish Breakout : Although the prevailing trend and our inclination are bearish, a breakout above the triangle’s resistance at 1.1195, which aligns with the highest point of the rising wedge, could signal a potential reversal or correction to the upside.
- Entry : Look for long entries on a breakout above the triangle resistance with strong momentum.
- Stop Loss : Set stops below the lower boundary of the triangle or recent lows.
- Take Profit : The initial targets for a bullish scenario can be set at 1.1190 and 1.1240, aligning with previous resistance zones or Fibonacci retracement levels.
Market Context:
Upcoming economic events, specifically the release of the Consumer Price Index (CPI), Producer Price Index (PPI), and unemployment claims, could significantly impact the USD. It will be crucial to observe how EUR/USD reacts at the time of these releases, as they could act as catalysts for a breakout from the current triangle pattern or shift the market sentiment in either direction.
Conclusion:
EUR/USD is at a critical juncture, consolidating in a triangle pattern after the breakdown and retest of a rising wedge. While a breakout in either direction is possible, we are more inclined towards the bearish scenario given the prior breakdown and retest. The trading levels for the bearish scenario, including supports at 1.09500 and 1.08000, are indicated on the chart. It is also possible to enter a short position now at 1.1085, given the current price and bearish setup. Bullish targets are set at 1.1190 and 1.1240, with the triangle's top at 1.1195 aligning with the highest point of the rising wedge, and the lowest point of the triangle at 1.0956.
Disclaimer:
This analysis is for informational purposes only and should not be considered financial advice. Past performance is not indicative of future results. Always conduct your own research or consult with a professional before making trading decisions.
Thank you for following our analysis! We hope this insight helps with your trading decisions.
— RisingStarFrX
