In today's technical analysis, we turn our attention to EURUSD, where the overall sentiment remains positive, but recent price action has settled into a narrow sideways consolidation. Despite the broader bullish tone, volatility has dropped significantly over the last two days, and the pair is coiling within a smaller pennant formation.
Looking at the recent structure, a larger pennant pattern began forming in early April, following a strong uptrend. This classic continuation pattern resolved to the upside, confirming the strength of the bulls and propelling the price higher. Since then, a new, smaller pennant has developed, starting with Friday’s candle and extending through a very quiet Monday and now into Tuesday, which—so far—shows even lower volatility.
From a technical standpoint, this consolidation signals a buildup before the next move. The direction of the breakout will determine the short-term outlook:
-
A breakout to the upside would serve as a continuation of the current bullish trend, triggering a buy signal and targeting the next resistance levels higher.
-
A downside breakout, however, would hint at a deeper correction, shifting the sentiment temporarily bearish and possibly aiming for support zones below 1.12.
For now, traders should watch closely for a breakout of the pennant structure. With volatility compressing, a decisive move could happen at any moment, and it will likely set the tone for the rest of the week.