The daily chart for the EUR/USD shows a potential head and shoulders reversal pattern forming.
Following last week’s close below the January to May trend line the formation of a bearish head and shoulders pattern is beginning to develop The downward sloping neckline comes in today at 1.4120 near yesterday’s low which coincides with a 38.2% Fibonacci retracement (1.4150).
Judging from the chart pattern, a move following a breach below the neckline would take the pair lower by roughly 8 cents. However, a more likely target is the 1.3430 level. This price has technical significance as it has shown in the past to be both resistive in early January and supportive in mid-February. 1.3330 off of the August 2010 pivot (not shown) could also come into play.
Should the EUR/USD head and shoulders chart pattern fail to materialize, resistance to the upside is found at 1.4450, followed by the May high at 1.4940.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
