The euro / dollar rallied 400 pips in 3 hours at the end of US trading. Before getting too excited, keep the move in perspective.
Extreme daily ranges have been the norm lately as the chart above illustrates (daily bars with 1 day ATR below). Still, keep the late day move in perspective; the EURUSD remains in a contracting range, which may be a bearish triangle. Even a break above the triangle line would not clear the EURUSD of the range that has been intact since late October.
On this chart, I show hourly bars with 1 hour ATR. Hourly spikes in volatility of similar magnitude in recent months have occurred at turns rather than at the beginning of a larger move in the direction of the spike. From a structural standpoint, a bearish bias is warranted as long as price is below the short term resistance line / longer term parallel channel resistance. Both lines are just above current price. Is a bullish breakout possible? Of course; but the rally looks similar to previous spikes that were completely retraced.
Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT Analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market. Contact at jsaettele@dailyfx.com
Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT Analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.
Contact at jsaettele@dailyfx.com