Euro May Fall to 1.13 vs US Dollar if Chart Top Pattern Confirmed
TECHNICAL FORECAST FOR THE EURO: BEARISH
- Euro forming H&S top implying drop back toward 1.13, if confirmed
- Lasting downswing may lead to break of 3-year support, exposing 1.05
- Holding short with 1.2153 overall cost basis, invalidation above 1.17
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The Euro may be ready to resume the downtrend against the US Dollar having exhausted a corrective upswing from mid-August lows near the 1.13 figure. A timely downswing courtesy of upbeat US labor market data has built upon preliminary signs of a Head and Shoulders (H&S) topping pattern identified on the 4-hour chart, bolstering the probability that sellers are prepared to retake the initiative.
Confirmation on a conclusive break below the pattern’s neckline resting just above the 1.15 figure would open the door for measured move back down toward the 1.13 mark. That would bring with it the possibility that long-term support in the 1.1449-1.1554 area – a former range top initially established in May 2015 that has been in play as a downside barrier for over a year – might succumb to selling pressure.
In that scenario, a return to three-year support centered on the 1.05 figure may well be in the cards. With that in mind, the short EUR/USD position established at 1.2407 and then scaled up twice, first near 1.19 and subsequently again at 1.1660, remains in play.The cumulative cost basis is 1.2153. Discretion will be used in triggering a stop-loss, though the daily chart implies a close above 1.17 as invalidation.
--- Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivakon Twitter
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