EUR/USD got rejected at 1.05, but for how long?

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on Nov 29, 2022
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  • EUR/USD failed at 1.05 this week but it builds energy for another push higher
  • A pennant formation points to more upside
  • By middle of December the bulls should try again at resistance

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One of the main market moves in the last couple of months was the EUR/USD rallying from its 2022 lows. Since the start of October, the leading currency pair is up by about 1,000 pips, trading near 1.05 yesterday.

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Is this the beginning of a bullish trend? Or will the euro fail at resistance? Technical analysis suggests that the EUR/USD strength has just begun.

EUR/USD chart by TradingView

Pennant building just below resistance

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As mentioned here, EUR/USD broke above a bearish channel some time ago. The exchange rate invalidated the bearish trend by breaking the series of lower highs.

Naturally, the big question is – what comes next? Technical analysis suggests more upside is possible for at least a couple of reasons.

First, the market now finds resistance at previous support. In other words, it needs time to overcome resistance, and it just consolidates below.

Second, the market forms a continuation pattern while consolidating – a pennant. Such patterns regularly form just below significant resistance, and the move that follows is extremely powerful.

The measured move, seen in orange, points to 1.10 or beyond. It will be the mother of short squeezes if it happens in December because liquidity tends to be thin around this time of the year.

All in all, EUR/USD looks bullish here at the end of November and ahead of December. As December is a short month due to the holiday season, expect the EUR/USD to make an attempt to overcome resistance by December 15, when all major economic events for the upcoming month are behind.

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