EUR/USD. Smart Money. The Market Has Opened, but Traders Are Still Celebrating

[Ben Graham]

The EUR/USD pair rebounded from the bullish imbalance 9 zone, which gave us another buy signal. Let me remind you that it all started earlier with bullish imbalances 3 and 8. 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 now showing a profit of about 260 points. Traders can decide for themselves what to do next: wait for a larger profit or close the position now. Personally, I am expecting further growth from the euro. Over recent months, I have repeatedly drawn traders' attention to 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 the 2025 highs to be tested and for the weekly bearish imbalance (visible on the chart) to be worked off. Over the past three days, market movement has been virtually nonexistent, which is easily explained by the Christmas and New Year holidays. Most likely, meaningful movement should be expected only in the new year.

The chart picture continues to signal bullish dominance. The bullish trend remains in place: a reaction to bullish imbalance 3 has been received, a reaction to bullish imbalance 8 has been received, and a reaction to bullish imbalance 9 has been received. Despite the fairly prolonged decline of the European currency, the dollar has failed to break the bullish trend. It had five months to do so and achieved no result. If bearish patterns or signs of a breakdown of the bullish trend appear, the strategy can be adjusted. However, at the moment, nothing indicates this.

There was no news background on Friday, and trader activity ahead of the New Year and immediately after Christmas was minimal. Despite fairly active trading on Monday and Tuesday, volatility nevertheless fell almost to zero. Today, the market is closed until Monday.

The bulls have had plenty of reasons for a new offensive for three months now, and all of them remain relevant. These include the (in any case) dovish 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 the U.S. three times already this year), weakness in the labor market, bleak prospects 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 will be entirely logical.

One should also not lose sight of Trump's trade war and his pressure on the FOMC. Recently, new tariffs have been introduced rarely, 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 no new wave of criticism from Trump has emerged. 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 completed. Bears would need to push the price down by about 400 points to reach it, and I consider this task impossible under the current news background and present circumstances. The nearest growth target for the euro remains the bearish imbalance zone of 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 29, the economic calendar contains no noteworthy events. The impact of the news background on market sentiment on Monday will be absent.

EUR/USD forecast and trader advice:

In my view, the pair may be in the final stage of the bullish trend. Despite the fact that the news background remains on the side of the bulls, bears have attacked more often in recent months. Still, I currently see no 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. Opportunities to open new trend-following long positions appeared when a reaction to bullish imbalance 3 was received, then after a reaction to imbalance 8, and this week—after the rebound from imbalance 9. The growth target for the euro remains 1.1976. Buy positions can be kept open, with stop-loss orders moved to breakeven.

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