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Massive Head and Shoulders Points to Lower EUR/USD

The EUR/USD pair trades with a bullish tone lately. Since the week started, it bounced from 1.2050 area and never looked back. Both technical and fundamental factors favored a higher EUR/USD.

On the technical side, the pair forms a head and shoulders pattern, and it was mandatory to bounce from the neckline. It did.

On the fundamental side, the ECB yesterday delivered yet another hawkish statement. On top of that, the communication was flawed,  hesitant, nothing compared to what Euro traders were used to during Draghi’s time at the ECB. Hence, the market took the ECB’s willingness to not use the PEPP envelope to its full as a hawkish message and bought the Euro.

Not only the EUR/USD is up, but the EUR/GBP and EUR/JPY, the most important Euro crosses, are up too. We may say that the ECB managed to deliver a hawkish message in one of the deepest economic crises in the European history.

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EUR/USD Technical Analysis

The technical picture shows a possible head and shoulders pattern forming on the 4h timeframe. At this point, the pair finds resistance given by the left shoulder, and it should be rejected back to the neckline. Bears may want to go short against the highs and with a take profit level that targets the measured move – 1.1850 and below.

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EUR/USD Price Forecast

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