The EUR/USD currency pair continues to trade within a range, which has been most notable by its repeated failures over recent days to break above the $1.1800 area. This is the kind of behaviour that is typical for this currency pair, leading many traders to write it off as boring and not worth trading.
This ranging pattern could be about to change, as bullish pressure is evidenced by the higher lows and sharpening ascending trend lines which can be seen in the recent price action.
What makes the USD currency pairs more interesting now is the relative uncertainty over the direction of the US Dollar, although the price action at the end of last week did suggest the Dollar looked heavy and could break to new lows.
With the US Dollar looking uncertain but potentially vulnerable, this solidifies the anticipation of a potentially significant bullish breakout beyond the $1.1800 area. Looking at the price chart below, we can see that this level has been tested several times. Repeated failures before a successful breakout tends to produce a more powerful breakout, which could generate powerful profits on the long side.
It is this “coiling” below $1.1800 which is attracting the interest of more traders.
EUR/USD Technical Analysis
The price action is showing higher lows but a clear line of resistance which is confluent with the round number at $1.1800. There is no long-term trend, which supports the tendency of the price to range. These features, notably the ascending trend lines, can be seen in the price chart below. Note that the ascending trend line has become steeper, which is a bullish sign.
It is true that trading this pair tends to work better on pull backs than breakouts, because it has such a tendency to retrace its impulsive market movements.
The month of May has produced a bullish triangle chart pattern with a flat top, and the pressure on the sell orders at about $1.1800 looks like it must be increasing.
The price area above $1.1800 has not been reached since February, so this would a technically significant breakout if it happens – a trend follower could justifiably get involved using the trade entry rules that most trend following funds follow. There is also a good amount of room for the price to rise before the next resistance level at $1.1840 is reached.
(image11052026eurusd)
Watch Out for Sudden USD Strength
The USA / Iran war and related tensions have been going on for several months, so it is easy to forget about it, especially as President Trump has made so many threats that he did not follow through with. However, with Iran strongly rejecting US deal offers to end the war and insisting on terms which are well beyond President Trump’s red lines.
This means that a return to kinetic war, which would happen very suddenly, is a possibility. Although President Trump tries to make his military moves over weekends when financial markets are closed, sudden news of action, or even an accidental clash or escalation, could send the USD higher as it tends to get a boost as a safe haven in these circumstances.
Could a Short Trade Set Up?
It is usually best in Forex not to take too strong a directional bias. Although I see the best potential opportunity which will be likely to set up today as a long trade, don’t ignore the potential for a final and decisive rejection of the strong area of resistance confluent with the round number at $1.1800.
A strong bearish rejection of the $1.1790 / $1.1800 area with a large candle showing some impulsive bearish momentum, could be an excellent signal to go short, especially if that is accompanied by some news about the Iran conflict which points away from a peace agreement in the near term.
My Take on EUR/USD
The thing to watch here today is likely going to be how the price reacts when it reaches the $1.1790 / $1.1800 area. This will probably be today’s pivotal point. If it gets established above $1.1800 long trades will likely be good opportunities; if it rejects that area with a firmly bearish move, a short trade will be an option, but it would face more obstacles to its progress than a long would.
It is a Monday today with zero high-impact economic data releases scheduled, so it might be a relatively slow day without a great deal of directional price movement.
Review, Support & Resistance Levels
In my previous EUR/USD analysis on Wednesday last week, I thought that the EUR/USD currency pair was likely to range between $1.1672 and $1.1800 areas, which was a good call.
Risk 0.75%.
Trades must be entered before 5pm London time.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1791, $1.1840, or $1.1791.
Place the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 20 pips in profit.
Take 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1742, $1.1724, or $1.1716.
Place the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Euro or the US Dollar.
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