EUR/USD

Evening all,

Hope you all are having a good weekend. I just took a look at a chart of EUR/USD currency pair on a platform I use to see forex charts. First, I will highlight an event on the chart from long ago; then, I will do a short analysis of the current price action and giv my take on this popular currency pair.

Going all the way back to 2004 – 2006, I have found a clear, huge head and shoulders pattern. This one comes with an upward breakout, and since I have been talking about this recently, I might as well show a past pattern just to illustrate how a head and shoulders pattern can mean upside.

Click on the chart below for an enlarged view of the chart. I draw your attention to the left side of the chart. There you will see grey circles indicating the head and shoulders pattern. It is massive alright. In the right shoulder, you will see rectangles depicting a smaller inverted head and shoulders. The significance of this is that in head and shoulder patterns, I like to smaller patterns in the head or shoulders. From what I have seen so far, those smaller patterns act as conditions to qualify the head and shoulders pattern. In other words, when I see those, I take those smaller patterns as validation of the larger picture. Moving on, once price breaks above the right shoulder, I expect a head test. This is something I learnt from a chartist from another country that I found on the web. It is a tool I keep in my technical analysis arsenal. If you like it, then add it in your ammunition box, and use it when need be.

In this case, I understand price did not shoot straight up and consolidate for a head test. Sometimes things cannot be so easy; if they were, we will all be buying/selling at the exact same moment when we see a buy/sell signal. The EURUSD was rangebound a few times before finally blasting off after getting above the head. Nevertheless, I have identified an upward parallel channel as well. This should have been a second reason for staying on the bull camp. So there, we see now how head and shoulders patterns can mean upside as well. The next time you see a head and shoulders, please do not scream for the downside. : ) Unless, of course, you do not agree with this “theory” – which is fine as well – there are no hard and fast rules to follow.

That was all rearview mirror, now for a look through the windscreen. (Technical analysis is still looking at the past though! But I mean this time round I will use the past to see the future). I have a strong resistance trendline drawn. It has roughly 3 hits, so it is an important line for me to put up. The value for resistance is now around 1.4000. Next, I have included fibonacci retracements in the chart. I like how price has responded well to those levels. The main item on the chart is a potential bullish pattern that I am seeing now. It may have been confirmed already, with price just above the pattern in a zoomed in view. The pattern is a bull flag (ornage colour). It is a small one, but I will still be watching it. The interesting thing is, a projection would bring the EURUSD all the way to the top of the resistance trendline. That comes in at about 1.4000 -1.4050. So I will be looking for the EUR/USD pair to trade up in the weeks ahead.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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2 Trackbacks

  1. By EUR/USD « TechnicalAnalysisTalk | Forex Exchange on February 20, 2011 at 9:54 PM

    […] EUR/USD. Evening all,. Hope you all are having a good weekend. I just took a look at a chart of EUR/USD currency pair on a platform I use to see forex charts. First, I will highlight an event on the chart from long ago; then, … View full post on EUR/USD – Google Blog Search […]

  2. […] On the weekly chart, you will see that I have highlighted a confirmed head and shoulders pattern. This one spans about half a year, and comes with an upward breakout. If you are new here, and do not know what I do expect from this popular pattern, please click on this link to read more: https://technicalanalysistalk.wordpress.com/2011/02/20/eurusd/ […]

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