The breakout of this week, was not only a new high for this year, but was also a bullish leg that lifted EUR/USD near its 61.8% Fibonacci retracement of the downtrend December 2020 – September 2022.
Above 1.1280, not far away given its current price of 1.1227, the pair would gain confidence but the way to reach 1.2348 is not obviously a linear and smooth process.
For the analysis just made above a weekly chart had been used, but for navigate the possibilities of next developments is also useful to have a long term view, if not for predicting purposes, at least for awareness for understanding what happened in the past, and if technical analysis has some true, that the past can repeat itself.
With a monthly chart the pair is still very depressed from its multiyear bearish wave started during the financial crisis back in July 2008 when EUR/USD was trading 1.6037 that ended last September when the pair reached 0.9506. This downtrend, where the pair had lost 40% from its record high, has seen at least 2 cycles in other asset classes during the same time period.
The monthly chart shows that that EUR/USD rose above the 23.6% retracement of the 2008-2022 wave this month. Leaving Fibonacci aside for the moment, can be also spotted the trendline that links lower highs that is clearly a relevant dynamic resistance. This level thus should be monitored in case prices would get closer and at the moment is near area 1.15. A breakout would validate the bullish set up, but at the moment, is necessary a confirmation of higher highs and higher lows to interrupt the multiyear bear cycle.
A closed much lower than the high, making a spike on a monthly chart, with prices below 1.1 would prepare the ground for another bearish wave.
