Video duration 9min 13sec.
Market outlook video reports for 2021:
Market outlook for Bitcoin
Market outlook for Bond futures
Market outlook for Crude oil
Market outlook for S&P500 Emini
Market outlook for EURUSD Forex
Market outlook for Gold futures
Video transcript
Introduction
Hi, everyone. I’m Al Brooks. Thank you so much for your attention. At the end of every day, I look at charts to try to get an idea about what to expect for tomorrow. I do the same at the end of the week, the end of the month, and now at the end of the year. This is the New Year’s Day weekend, and I made a series of charts to create videos to give my thoughts about what to expect for major markets in 2021. I made six different videos – Emini, the bond market, the Euro versus the dollar Forex market, gold, crude oil, and Bitcoin.
Now, I want to add a disclaimer up front: with every additional tick that we see, the outlook changes. I’m giving you my perspective as of right now, the start of 2021. I hope that you find the information useful.
EURUSD Forex market outlook for 2021
I’m going to talk about the euro versus the dollar in this video and my outlook for 2021. This is as of January 1st, 2021. Every new tick, every little move up or down that the euro does from here on gives new information. This report that I’m doing today is as of January 1st.
EURUSD Forex monthly chart
This is a monthly chart of the euro versus the dollar. We had a very strong bull trend from 2000 to 2008, and we’ve been in a bear channel since then. We had a bear breakout and then a second attempt at a bottom. This low is above that low, so it’s still more likely that this is a bull flag, a pullback from this bull trend, even though the pullback has gone on for 12 years. You can draw a Triangle or you can just call this a bear channel. A bear channel usually gets a bull breakout, and therefore you treat it like a bull flag. You expect the market to go higher.
We broke above the bear trend line this year, and the bulls are hoping that this is the start of a move up that gets us up here or all the way back up here. It’s too early to tell. The bulls first have to get above this Lower High, and we currently have a Wedge rally. So it’s not as strong as what people on television make it sound.
A six-year Trading Range
Also, this is a 6-year Trading Range and we’re at the top of the range. We have not yet broken out. If we do break out, the bulls will look at this as a Double Bottom – this low, that low. This is the neckline, and they’ll want a Measured Move up, which gets us back into this Trading Range from 2008 to 2014. Bears, they want a Double Top. They see this as a Trading Range and this as a bull leg in the range. We have a Double Bottom here; they want a Double Top here, and if it reverses down, we could stay in the range for another several years before we break out either to the upside or the downside. Right now we’re getting the bull breakout, but we also have to break strongly above this Lower High.
Here’s what I mean by a 6-year Trading Range, and we’re testing the top of the range now. Until there’s a breakout, there is no breakout, and we do not have the breakout yet. We have a breakout above the bear trend line, but not above the Trading Range. We still have a Lower High, and this still could be part of a bear channel. The bulls need to break above the Lower High to end the series of Lower Highs. A bear trend means Lower Highs. If you stop getting Lower Highs, you’re no longer in a bear trend. You could be in a Trading Range, but you could also be in a bull trend.
Most attempts to break out of a Trading Range fail, and Trading Ranges can last a long time. But the two things that I think are most important is even though we sold off for a lot of years, we’re still forming a Higher Low, so this still is more likely a bull flag, and we’re breaking above the top of the bear channel, so this is the start of a breakout above a bull flag. We next have to break strongly above that, and if we do that, then we could go quite a bit higher. Maybe a Measured Move up to here.
EURUSD Forex weekly chart
This is a weekly chart, and you can see three pushes up – one, pause, two, pause, three. So we have a Wedge rally here and there’s also a Wedge here – one, two, and three. We’re not quite up to that line, but if this is the start of a reversal down, I would redraw the line and say this is Point 1, that’s Point 2, and Point 3 is right there. We have an Outside Down bar. We went above the high of that bar and then below the low of that bar. But this week did not close below that bar, and it had a fairly conspicuous tail below, so this is not nearly as bearish as it could be. It still could go sideways and then up.
Nested Wedge. We have a smaller Wedge, and it’s the third leg up in a bigger Wedge. But unless we get a strong downside breakout, it’s still in a bull channel and the odds still favor higher prices.
EURUSD Forex daily chart
Here’s the daily chart, and at the end of the year, January 1st, we had 2 very big bear bars. We have a spike up and a channel. Three legs – one, two, three – and we’re breaking below the bull trend line. I don’t have it drawn in. But look at the low of this bar. We have a very big tail, a very big bounce. It could be simply a breakout test of that breakout point. We were in a Trading Range for a long time, and we broke above it, and this could be simply a test of that breakout point.
Also, when you have a spike pullback channel, the market typically comes down to the start of the channel and bounces. The bulls hope it’s a Double Bottom, we break above the neckline and go up for a Measured Move. The bears hope that we bounce to a Lower High or a Double Top and break below the neckline of the Double Top – so that high and maybe this high – and then go down here. If we do go down, the bears really need to drive it down strongly, down here, to make traders think that the bulls have lost control. Right now it’s still more likely that the best the bears get will be a Trading Range. Might get a couple legs down – one, bounce, two – maybe three legs down – one, bounce, two, bounce, three. But chances are whatever selloff we get here will be a bull flag and it will try to go higher.
A breakout test of support or bounce?
A bull breakout, so a spike up and then a channel. Three pushes. You expect a break below the bull channel and a test of the start of the channel and then a bounce. So we’ve done all of that. Now we’ll decide: is this just a breakout test of support, and will we go up, Double Bottom here? Or will we bounce and continue sideways? Or will we form a Lower High and get another second or a third leg down?
The bears would like a second or third leg down. They’d like to get a Major Trend Reversal. But this is a pretty Tight Bull Channel, and the weekly and monthly charts look pretty good for the bulls. So chances are this is not going to be a reversal into a bear trend. Chances are we’ll either go sideways or a little bit down and then we’ll try to continue higher. The bears are hoping that this is a big enough bear surprise so that we’ll get at least a second leg down. And we might. Sometimes it’ll even come all the way back up here or go a little bit above the top of the spike and then have a second leg down.
Concluding comments
In any case, whether or not we get a second leg down, at the moment it looks like we’ll probably go higher. It looks like we’re going to get a second leg down. This is a very big bear surprise. Even if we get back up here or even a little bit above, I still think the odds are we’re going to get a second leg down.
Again, this is my take on the euro versus the dollar for the coming year.
Close
Again, I’m Al Brooks. Thank you so much for your attention. I hope that you found some of this information useful. I want to wish you the best for the coming year as a trader, and I also want to wish you and your family a very wonderful 2021.
