EUR/USD – Head and Shoulders Now in Place

Some points to consider in this Forex market:

• Head and shoulders forming below 1.11.
• Possible confirmation of top in play yet. This argues to stand aside and not take a short right now.
• Trade strategy: Stand aside

The EUR/USD appears to be establishing a top below 1.11. There is a head and shoulders candlestick formation on our daily MT 4 chart. This head and shoulders has been confirmed as of late trading overnight. I am still not quite convinced of this sudden move lower. There is still some resistance below 1.11 and we could see a euro recovery following the upcoming European Central Bank (ECB) monetary policy meeting next month.

Technical Analysis

Let’s talk about today’s EUR/USD daily technical analysis. There is no change from my forecast from yesterday. There is a congestion area running from the May 27 low. This support area runs from 1.0778 to 1.0818. We are trading in this area now. A daily close below this technical level challenges the technical support lining up at 1.0601. The alternative EUR/USD technical analysis, should the euro recover, notes a horizontal pivot as the first strong layer of resistance. This technical resistance level is at 1.0937. A break above this level challenges 1.1060. This level is also the December 15, 2015 high.

Trade Strategy

I am eager to pull the trigger on a short euro trade. With that in mind let’s get into today’s EUR/USD trade strategy. There is confirmation of a top or the head and shoulders pattern on the daily MT 4 chart as this Forex market had a daily close below the neckline at 1.0778. However, I will not act yet. There is risk aversion in play thanks to the policy decision made by the US Federal Reserve to hike rates this month. This will lend support funding currencies like the euro. For now I will stand aside and remain flat in the EUR/USD Forex market and wait for a more actionable short euro sale signal to come along.