- EUR/USD spent last week testing the neckline of H&S pattern, rejected again on Friday post-NFPs
- Losses may not come in massive wave of selling, but weakness is anticipated
- Support and resistance levels to watch during next week
For a longer-term technical & fundamental outlook on EUR/USD, check out the DailyFX Q4 Forecast.
We’ve spent a lot of time over the past couple of weeks discussing the developing and now confirmed ‘head-and-shoulders’ pattern in EUR/USD. We came into last week with the expectation that, based on the break of the ‘neckline’ of the H&S formation, we would see more selling ahead. While the past five sessions effectively brought little net-change, a pair of rejections at ‘neckline’ resistance on Thursday and following Friday’s U.S. jobs report suggests selling is on its way.
On the top-side, look for the 11660/90-area to act as formidable resistance. Should we see a bump higher beyond the ‘neckline’ the pattern’s bearish implications will remain intact, but a push beyond the trend-line connecting the September high and ‘right shoulder’ would be reason for caution on maintaining a downside bias.
Looking lower, the first level of support comes in at the 10/27 low at 11574, which on a break will put the euro firmly below the 2016 high of 11616. Next up is the lower parallel tied to the trend-line off the Sep high, and currently arrives in the high 11400s. It’s not viewed as the most steadfast form of support given it runs in the direction of the trend, but could provide a firm enough of a floor to allow for a bounce.
Selling will need to intensify for us to see a push down into the next set of significant levels this coming week, but with momentum swing-highs carved out during 2016 will come into play at 11429, 11366, and then 11298. The 200-day MA is rising up in the mid-11200s at the moment, but will likely be in the 11300s by the time price and the moving average converge. The ‘measured move target’ (MMT) for the H&S formation is ~11240, which is derived by subtracting the height of the pattern from the neckline.
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In Thursday’s “Becoming a Better Trader” webinar we discussed classic reversal chart patterns, and looked at the EURUSD ‘head-and-shoulders’ as one of our live examples. Join me at 930 GMT on Thursday, November 16 for a discussion on neutral & continuation-style patterns. You cansign up here.
---Written by Paul Robinson, Market Analyst
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