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The EUR/USD Prepares to Breakout as the US Dollar Consolidates

The EUR/USD Prepares to Breakout as the US Dollar Consolidates

by Walker EnglandDecember 8, 2016

Talking Points:

  • The EUR/USD Trades Sideways as the US Dollar Consolidates
  • The Creation of an Inside Bar Allows Traders to Plan for a Breakout
  • Looking for additional trade ideas for the US Dollar? Read Our Equities Market Forecast

The US Dollar Index (Ticker:DXY) and several major Dollar pairs have continued to consolidate through today’s trading. This includes the EUR/USD, USD/JPY, and AUD/USD. Each of these currency pairs are set to close the day with an inside bar. This pattern is created by prices closing the session inside of a previous daily candles high or low. Traditionally traders may use this pattern to identify a range for trading, or to wait for prices to breakout.

EUR/USD Daily Chart and Inside Bar

US Dollar Consolidates

(Created Using TradingView Charts)

A great example of an inside bar is the EUR/USD. Today’s trading actually marks the second day of prices failing to breakout to a new high or low. As seen in the graph below, the pair is currently trading inside of Mondays high (1.0796) and low (1.0504). These values should be considered as support and resistance which traders may use for planning a breakout into the market. It is important to remember that traders may opt to set entry orders on either side of the market in accordance with their trading bias. Traders that are bullish the US Dollar may look to buy the EUR/USD, while US Dollar bears may select to sell the pair under support.

Prior to a breakout traders,may elect to trade continuing consolidation by referencing these values as well. If the market respects support and resistance, traders may look to buy near support and sell near resistance until these levels falter.

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