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EUR/USD Rallies to Be Sold as Right Shoulder Develops

EUR/USD Rallies to Be Sold as Right Shoulder Develops

Christopher Vecchio, CFA, Senior Strategist
EURUSD_Rallies_to_Be_Sold_as_Right_Shoulder_Develops_body_Picture_1.png, EUR/USD Rallies to Be Sold as Right Shoulder Develops

Chart prepared by Christopher Vecchio using Marketscope 2.0

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FOREX Analysis: The Right Shoulder of the Head & Shoulders pattern dating back to September 2012 continues to develop (formed last week around $1.34000), and upside momentum from the mid-May lows has been snapped (as determined by daily RSI). However, weakness may be overcooked in the near-term, as short-term (H1, H4) Slow Stochastics (5,3,3) have turned bullish as the pair has found support just below 1.3100. Support comes in at 1.3070/80 (38.2% Fib July 2012 low to February 2013 high [blue line], 50% Fib April low to June high [red line]). Resistance comes in at 1.3140/60 (38.2% Fib April low to June high [red line]).

FOREX Trading Strategy: US Treasury yields have broken out (breakdown in price) as the Fed has signaled its willingness to taper QE3. Accordingly, any near-term EURUSD strength is likely short-term traders taking profits, not the establishment of new longs. Selling rallies in the pair, as it carves out its Right Shoulder, remains the strategy for now.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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