08.04.202114:21 Forex Analysis & Reviews: EUR/USD and GBP/USD. Technical capabilities of the medium-term trend adjusted for short-term expectations

Since the beginning of 2021, the medium-term upward trend has been hit by a corrective move, where the European currency has weakened by about 5.35%, while the pound sterling has declined in value by only 4%.

On the one hand, it may seem that the scale of the correction has reached the limit of the possible, but when you think about the economic problems in Europe and Britain, and then compare the data with an upward trend, there is a reasonable resonance that torments many traders.

What are the chances of a change in the medium-term trend?

First, we will consider this issue regarding the EUR/USD currency pair, where the corrective move from the peak of the medium-term trend has the largest scale.

Analyzing the sequence of cycles of the upward trend from March 2020, one could notice that the speculative excitement led to a series of inertial movements, which became the structure of the medium-term trend.

Speculation is an unstable thing, especially when considering the structure of a trend, which means that the structure was built from scratch and can quickly break down. The area of interaction of trade forces 1.1600/1.1650/1.1700 is considered as a point of trend reversal, from which a primary rebound has already occurred, which signals that the area is chosen correctly and the interaction of trade forces is confirmed by the market itself.

Details of the Trade Force area 1.1600/1.1650/1.1700

Analyzing the price area, you can see that it has been pursued by market participants since 2015, having more than 9 confirmations, which makes it not just a mirror level, but an area relative to which there is a change in trade interest.

Holding the price lower than 1.1600 on the daily period will most likely lead to a distribution of trading forces in favor of sellers, and this will lead to a change in the medium-term trend.

The pound sterling (GBP/USD), which has the largest upward movement and has shown the maximum possible speculative interest, is not as active in a corrective scheme as, for example, its European counterpart.

For the status of an elongated correction to appear, the pound sterling should at least weaken by 150-200 points, and even with this price movement, we will still not reach the area of interaction of trade forces, to which a change in the medium-term trend will be considered.

The range of 1.3200/1.3300/1.3400 serves as an area of interaction of trade forces, which has many confirmations in history and deserves the status of increased attention from market participants. Timestamps: 09:20, 12:19, 03:19, 09:18, 09:16

Results of medium-term planning

Considering both currency pairs, one can see clear signals of a possible downward movement, but when parsing the British currency, the chances of weakening are higher since the main pivot points have not yet been reached by the quotes.

Short-term expectations and planning of possible trading decisions

Since the beginning of April, the euro has been showing a rather active upward interest from the upper border of the area of interaction of trade forces at 1.1600/1.1650/1.1700, where the maximum deviation point coordinates 1.1914.

There is no need to worry that the downward interest has been broken since the scale of the price change is not yet that great.

The price coordinates 1.1860 and 1.1915 are considered as short-term expectations and possible scenarios for the market development, relative to which the quotes have focused over the last few days.

In simple words

The highlighted coordinates will be considered speculative and will be considered by traders as an outgoing impulse towards a breakdown of a particular value (1.1860/1.1915).

At what point can there be a change in trading interest with the downward trend from the peak of the medium-term trend?

This issue is not yet widely understood among traders, but it is worth considering. So, the risk of failure of the downward development may arise if the price is kept higher than 1.2050 in the daily period.

The sterling (GBP/USD), with all the existing correlation with its European counterpart, has been in the opposite mood over the past few days, eventually returning the quotes within the mirror level of 1.3750.

In simple words, we have a recovery relative to the upward movement 1.3669 ---> 1.3917 by more than half, which is considered a good signal of a possible downward development and prolongation of the existing corrective movement from the peak of the medium-term trend.

In this situation, to maximize the volume of short positions, the quotes must sequentially break through two price values, this is 1.3705, the reflection from March 30, as well as the local minimum of the corrective move at 1.3669 from March 25. In this case, the downward development will receive an additional incentive, and who knows, perhaps we will be able to reach the area of interaction of trade forces 1.3200/1.3300/1.3400.