By: Mike Kulej
Currencies are known as some of the best trending financial instruments. This means, that major trends, once established, have tendencies to last for a long time. Unfortunately, this characteristic of Forex was not visible in the second half of 2010. Most of the currency pairs showed indecision, especially on longer-term charts.
Such was the case for the EUR-USD, which closed the year at 1.3360, which happens to be in the middle part of the annual price range of this pair. This is clearly visible on the weekly chart. While that is not a time scale which most people use for trading, it defines the major trends and a long-term price direction.
Several recent peaks and bottoms on this chart formed a symmetrical triangle. The EUR-USD has just tested the lower part of this formation and moved even closer to its apex. One would expect the price to move out of this pattern soon and likely assume a direction for a price move of a much larger magnitude.
Other technical indicators should support a breakout from the triangle. One would like to see the ADX to turn north, suggesting a trend under development. The MACD should follow the price, decisively moving on either side of the zero line. Chances are that the EUR-USD will develop a strong move in 2011, the only question is when.