EUR/USD. Smart Money. The Market Closes Today

[Ben Graham]

The EUR/USD pair rebounded from the "bullish" imbalance zone 9, which gave us another buy signal. Let me remind you that it all started with imbalances 3 and 8, which were also bullish. The pair formed two buy signals, and traders had an excellent opportunity to enter in continuation of the bullish trend at the most favorable price. This long position is currently showing a profit of about 260 points. Traders can decide for themselves what to do next: wait for greater profits or close the trade now. Personally, I am expecting further growth from the euro. Over the past few months, I have repeatedly pointed out to traders an obvious fact: the bullish trend remains intact. Thus, all this time I have been waiting for a new bullish offensive. Now I am waiting for a test of the 2025 highs and the "bearish" imbalance on the weekly chart.

The chart picture continues to signal bullish dominance. The bullish trend persists: a reaction to bullish imbalance 3 has occurred, a reaction to bullish imbalance 8 has occurred, and a reaction to bullish imbalance 9 has occurred. Despite a fairly prolonged decline in the euro, the dollar has still failed to break the bullish trend. It had five months to do so and achieved no result. If bearish patterns appear or signs of a breakdown of the bullish trend emerge, the strategy can be adjusted. But at the moment, nothing points to this.

The news background on Wednesday was virtually absent, and trader activity on the day before Christmas was minimal. Despite fairly active trading on Monday and Tuesday, traders also want to enjoy the holiday. Today, the market is closed until Friday.

The bulls have had plenty of reasons for a new advance for the past three months, and all of them remain relevant. These include the dovish (in any case) outlook for FOMC monetary policy, Donald Trump's overall policy (which has not changed recently), the U.S.–China confrontation (where only a temporary truce has been reached), protests against Trump (which have swept across America three times this year), weakness in the labor market, the bleak outlook for the U.S. economy (recession), and the shutdown (which lasted a month and a half but was clearly not fully priced in by traders). Thus, in my view, further growth of the pair is entirely justified.

One should also not lose sight of Trump's trade war and his pressure on the FOMC. Recently, new tariffs have been introduced infrequently, and Trump himself has stopped criticizing the Fed. But personally, I believe this is just another "temporary lull." In recent months, the FOMC has been easing monetary policy, which is why a new wave of criticism from Trump has not appeared. However, this does not mean that these factors no longer create problems for the dollar.

I still do not believe in a bearish trend. The news background remains extremely difficult to interpret in favor of the dollar, which is why I do not even try to do so. The blue line shows the price level below which the bullish trend could be considered complete. The bears would need to push the price down about 400 points to reach it, and I consider this task unattainable under the current news background and circumstances. The nearest upside target for the euro remains the bearish imbalance at 1.1976–1.2092 on the weekly chart, which was formed back in June 2021.

News Calendar for the U.S. and the Eurozone:

On December 25, the economic calendar contains no noteworthy events. The impact of the news background on market sentiment on Thursday will be absent, and the market itself will be closed.

EUR/USD Forecast and Trading Advice:

In my opinion, the pair may be in the final stage of its bullish trend. Despite the fact that the news background remains on the bulls' side, bears have been attacking more often in recent months. Nevertheless, I do not currently see realistic reasons for the start of a bearish trend.

From imbalances 1, 2, 4, and 5, traders had opportunities to buy the euro. In all cases, we saw some degree of growth. Traders also had opportunities to open new trend-following long positions when a reaction to bullish imbalance 3 was received, after the reaction to imbalance 8, and this week—after the rebound from imbalance 9. The upside target for the euro remains the 1.1976 level. Long positions can be kept open, with Stop Loss orders moved to break-even.

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