The bearish euro trend is alive and well with no end in sight says Al Brooks.
The EURUSD Forex pair has been in an 11-month bear channel with no end in sight (see chart). Traders are betting on reversals up and down every few weeks.
It has been forming lower highs and lows since June 2018. Legs up and down have lasted only a few weeks before there was a reversal. There is no evidence that this trend is about to end. Traders will continue to bet on reversals every two to three weeks.
Channels often spend a lot of time in trading ranges. The EURUSD Forex market had been in a tight trading range for five months on the daily chart. Two weeks ago, the bears broke below the trading range. Because they got consecutive closes below the range on the daily chart, the odds favor at least slightly lower prices.
The March 7 low of 1.1177 was the bottom of the range. It is also the neck line for the Feb. 28 and March 20 double top on the daily chart. Since there were two closes below the neck line, traders are expecting a measured move down over the next couple of months. That target is 1.0942.
The bears want a measured move down based on the height of the entire five-month range. That projects down to 1.0783.
How does a bear channel end?
These targets are reasonable as long as the bear channel continues. To end the bear trend, the bulls need a couple closes above the most recent major lower high. That is the March 20 high of 1.1448.
Even that is not enough. They then need a higher low and then a higher high. At that point, traders will conclude that the bear trend on the daily chart has ended.
The end of a bear trend usually means the start of a trading range. Less likely, a bear trend will reverse into a bull trend without forming at least a small trading range.
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