Euro Biased Lower But Weekly Chart Shows Warning Sign for Sellers
TECHNICAL FORECAST FOR THE EURO: BEARISH
- Euro retreats to October bottom but breakout confirmation still pending
- Weekly chart warns a Head and Shoulders bottom may be taking shape
- Short position still in play as decade-long bearish trend remains intact
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The Euro is trying to resume the downtrend against the US Dollar after hawkish minutes from September’s FOMC meeting, as expected. Daily chart positioning continues to look somewhat convoluted however. Prices sank back to support marked by the October 9 low at 1.1432 but a breakout is yet to be confirmed.
The outlines of a would-be Head & Shoulders (H&S) bottom on the weekly chart muddy the waters further. Confirmation on a close above neckline resistance at 1.1768 would imply a measured move higher to probe resistance above the 1.22 figure.
Still, the longer-term picture looks decidedly bearish. The monthly chart shows prices resuming a decade-long decline after breaking counter-trend support in April. Indeed, even if the H&S setup were to be realized, the outlines of this decline would be kept broadly intact.
With that in mind, the short EUR/USD trade initially triggered at 1.1708 and then scaled up at 1.1468 remains in play but convincing invalidation of the weekly H&S setup will be sought before adding to exposure further. Alternatively, a close above daily chart trend resistance – now at 1.1628 – may see the trade unwound.
--- 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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