The price action of the EURUSD is currently consolidating near the dip of the previous downtrend as bullish pressure is once again accumulating. This may represent a very early stage in the development of a new uptrend, which may allow bulls the opportunity to utilise contrarian trading strategies on the expectations for such a trend reversal.
Bulls should, nevertheless, remain cautious and patient as such major trend reversals are typically underpinned by heightened volatility and erratic fluctuations, which may wipe out any positions that lack precise execution. This is especially true given the current outlooks on the euro and dollar.
The greenback was bolstered by the January inflation data from last week, and yesterday's robust consumption numbers could add to that effect. Meanwhile, the euro was pressured by the weakened economic sentiment last month, which was affected by the looming prospects of a Russian invasion in Ukraine.
That is why traders seeking to go long the EURUSD can only do so provided they apply very narrow stop-losses. Given the likelihood of volatility outbursts in the near future, they may have to place several orders before they gain favourable entry.
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