The EURUSD trend remains short-term bullish as the exchange rate continues to create higher and higher lows on the six-hour chart. However, a “head and shoulders pattern” suggests that the mood amongst traders and investors is changing.
The EUR to USD exchange rate bottomed out last year in October from the 1.0887 level. The price has since then created the two following essential lows: the November 29 low at 1.0979, followed by the December 20 low at 1.1066, with the latter being the trend defining level.
As long as the price trades above the trend defining level, the price might be able to reach the December high of 1.1242.
However, on a break to the 1.1066 level, the price might turn lower and reach the 1.0990 level, followed by the 1.0922 level. The 1.0922 level is a level suggested by the head and shoulders pattern that has been developing since December. The December 12 high is the right shoulder of the pattern, while the December max price is the head, and the January 16 high being the right shoulder.
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The development of a month old head and shoulders pattern is exciting, as it ties in well with my long term outlook for the markets. For more, on this, download the ATFX quarterly market update.
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