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EUR/USD Technical Analysis: Waiting to Confirm Topping Setup

EUR/USD Technical Analysis: Waiting to Confirm Topping Setup

Ilya Spivak,

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro in Digestion Mode Following Post-FOMC Recovery Against US Dollar
  • Waiting to Confirm Head and Shoulders Pattern Before Triggering Short Trade

The Euro has transitioned into consolidation mode after recovering against the US Dollar as expected following the ECB monetary policy announcement. Overall positioning continues to hint at the formation of a Head and Shoulders topping pattern, which may precede resumption of the long-term down trend.

Near-term support is in the 1.0777-1.0818 area, marked by the May 27 low and the 23.6% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 38.2% level at 1.0602. Alternatively, a push above the December 15 high at 1.1060 paves the way for a challenge of falling trend line resistance at 1.1201.

The Head and Shoulders setup requires a breach of neckline support at 1.0777 to become actionable, which has yet to materialize. Furthermore, the threat of risk aversion ahead represents a possibly potent catalyst for Euro gains amid the unwinding of carry trade positions. With that in mind, we will remain on the sidelines for the time being.

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