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Is the EUR/USD really in a Bullish Trend? |
by Ryan Teeples
There's a lot of excitement in the forex right now about the emerging trend on the EUR/USD. US equities are on the rise, and demand for USD backed investments wane as investors continue to look for, and feel good about higher-yield alternatives. As a result, the EUR (and all the major European currencies) are gaining ground against the Dollar. 
But are you ready to call the performance of the last couple months a new long-term uptrend on the EUR/USD and GBP/USD? Some say yes (and often loudly, with Anti-American sentiment). Others argue with gusto that this run-up is unstable, and just part of a larger consolidation pattern.
A Nice Run Recently...But a Long-Term Trend?
But traders who have been frustrated with the uncertainty, volatility and outright chaos of the last six months are silently wishing an obvious new trend would emerge, up or down. So what do we make of this run-up we've seen in on the EUR/USD?
As many of you know, we discourage all but the most experienced and dedicated traders from trading in the short term, especially intraday. We all come from the brokerage world, and we've seen first hand how few traders (less than 5%) ever even recover losses trading in the short-term. So we encourage traders to Learn to Identify Long-Term Trends. That's why we're watching this current emerging trend closely.
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Essential Reading for Traders
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| | | | | A Simple Man's Formula
So I offer here the simple way I look at it. I'm not a technical trade timer, so the exact pips are less important to me than some, but for evaluating the long-term trend, this can work as a great guideline.
Note that despite the nice run we've had the last few months (chart below), we have yet to reach the high we saw before the major down-turn to new recent lows. The November climb was followed by a plummet to the 1.25 level.
And after bottoming out in March, we've been climbing, but we still have yet to reach that 1.45 resistance level we stopped at in November before the fall. We've drawn a Fibonacci study on the chart below from that high in November to the low in March to illustrate. If you don't currently use Fibonacci Analysis in your trading, be sure to read Fibonaccis for Forex Traders.
I can't in good conscience say we have a new bullish trend on the EUR/USD until we've made a clear break through the 1.44 level and are out of this long-term consolidation range within the 0% and 100% Fib lines. For now, it's just a nice run back up to resistance.
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