EURUSD Rising Wedge on Bearish Divergence While Above 1.21

It is difficult to be bullish on the EURUSD here, and I am not even pretending to be. The pair started the month of December with a massive short squeeze, trading well above the 1.21 with one day ahead of the November NFP in the United States and one week ahead of the ECB December decision.

However, in doing so, it forms a rising wedge or a contracting triangle; it does not really matter the definition. The pattern makes higher highs against the RSI, a bearish development. Also, the lower edge seems to be broken at this point, another bearish development.

Brexit, ECB, the USD reflation theme – they all fueled the EURUSD rally. It may be that the rally will continue, but at this point, bears have a chance for a sound risk-reward ratio on the short side.

EURUSD Rising Wedge

A rising wedge needs a break below the lower edge for the pattern to be considered complete. The break has come after today’s London session opening. As such, bears may want to go short with a stop loss at today’s highs and a target at 50% retracement of the entire wedge formation, well below 1.20.

This way, the risk-reward ratio for the trade exceeds much more than the desired 1:2 level, one day ahead of the NFP release.

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