EUR/USD Forex Signal: Break and Retest Pattern to Form

Crispus Nyaga

There is a possibility that the pair will retest the support at 1.1385 and then resume the bullish trend.

Bullish View

  • Set a buy-limit at 1.1385 and set a take-profit at 1.1450.
  • Add a stop-loss at 1.1300.
  • Timeline: 2 days.

Bearish View

  • Set a sell-stop at 1.1380 and a take-profit at 1.1300.
  • Add a stop-loss at 1.1450.

The EUR/USD pair retreated slightly on Friday after the US published relatively weak retail sales numbers. The pair is trading at 1.1410, which is slightly below last week’s high of about 1.1480. It has risen by about 1.2% from its lowest level this year.

Calm Day Expected

The EUR/USD will have a relatively calm day today since the US markets will be closed for the Martin Luther King day. Also, there will be no major economic data from the European Union today.

Still, the pair will have some key activities later this week. For one, there is a growing risk that the Russia and Ukraine crisis will continue this week. Western countries are concerned that the Russian military will invade Ukraine, especially after last week’s major hacks that targeted the country’s government.

The crisis will be bearish for the EUR/USD pair for two main reasons. First, the pair will decline as demand for the safety of the US dollar rises. The currency tends to rise in high risk periods because of its safe haven status.

Second, the pair will decline because of the potential risks for the European economy. In the past few weeks, gas prices have jumped as Russia has reduced the amount of gas flowing to Europe through Ukraine.

Later this week, there will be some key economic numbers that will move the pair. On Tuesday, the ZEW Institute will publish the latest economic sentiment data. These numbers are expected to show that the economic sentiment made a modest increase in January as fears of the Omicron variant waned.

Meanwhile, the EUR/USD is struggling after the recent numbers from the US. On Friday, data showed that the country’s retail sales declined in December as buyers remained concerned about inflation.

EUR/USD Forecast

The EUR/USD pair declined to 1.1410, which is lower than last week’s high of 1.1481. It also moved slightly below the 50% Fibonacci retracement level. Also, the pair is slightly above the important support level at 1.1384, where it had struggled moving above earlier this month. It is slightly above the 25-day and 50-day moving averages.

Therefore, there is a possibility that the pair will retest the support at 1.1385 and then resume the bullish trend. This is known as a break and retest pattern.

EUR/USD

Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

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