Market Structure

Euro € : Midway reached! What’s next?

Published on February 12, 2021

Overview

Euro: The euro (symbol: €; code: EUR) is the official currency of 19 of the 27 member states of the European Union. This group of states is known as the eurozone or euro area. The euro is the second-largest reserve currency as well as the second-most traded currency in the world after the United States dollar. As of December 2019, with more than €1.3 trillion in circulation, the euro has one of the highest combined values of banknotes and coins in circulation in the world. EUR/USD is the forex ticker that tells traders how many US Dollars are needed to buy a Euro. The Euro-Dollar pair is popular with traders because its constituents represent the two largest and most influential economies in the world. It is mostly inversely related to the Dollar Basket ( DXY ) as such whenever US dollar becomes stronger, Euro becomes weak and vice versa.

Technical and Structure Review

Let's look at the structure of this market. Starting from its inception from year 2000 @ US$ 0.83420 for 1 Euro, it made a high in year 2008 fetching US$ 1.5988 for a Euro. We see this a full and mature bullish market structure. Since then until Dec. 2016 it completed its corrective structure. The reason to note this as a complete structure is :

The rally from 2016 lows to 2018 highs is indicating a start of a new bull market after its correction lows in 2016
The fall from 2018 highs to March'20 lows indicating that it was a correction
And now, from March 2020 lows until now, has all the traits of a bullish continuation formation.

Having said all of this, if the price in the next few months breaks and sustains price of $1.26 to $1.27, then this bullish continuation partner will move up and up. The possible target will be $1.40 to $1.46. If the prices reverse and sustains below $1.25 in the next few weeks, months then we should be head lower to $1.06 levels. Therefore, it is important to see how the price reacts in the next few weeks to months to make a longer term trade and possible investments. Bottom-line form a structure perspective:

short term = Neutral to bullish
medium term = correction
Long Term = Bias is bullish but levels and price action at around $1.25 will determine where it is going from here.

As such, it will be pre-mature to call that the worst is over for Euro. Another way to look at is reviewing the DXY basket. Read about it here: ( http://mymarketstructure.com/currency/dxy-dollar-index We will keep it on our watch list make updates as necessary.

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