EUR/USD Head & Shoulder Pattern Kick Starts Bearish Outlook

The EUR/USD made a bearish reversal when testing the previous top. As expected in our previous analysis, price action made a bullish ABC pattern.

This article will review what to expect next from the Elliott Wave analysis, Fibonacci levels, and chart patterns.

Price Charts and Technical Analysis

The EUR/USD is expected to make a full bearish price swing in wave C (pink) after completing a bullish wave B (pink):

1. The EUR/USD made a head and shoulders reversal chart pattern (red boxes). There were also divergence patterns between the tops (purple lines). A strong bearish impulse is expected to be wave 1 (grey).
2. Price action needs to confirm this bearish outlook by breaking and closing (orange arrows) below the 21 ema zone, 144 ema zone, plus support trend line (green).
3. Currently a bullish ABC (orange) is expected to complete a wave 2 (grey).
4. A break below the -61.8% Fibonacci level confirms a wave 3 (rather than a potential wave C).
5. A break above the previous top invalidates this bearish outlook (red circle).

On the 1 hour chart, price action is moving up and down around the 144 ema zone. Usually this indicates a larger range or reversal:

1. The bulls seem to have completed a 5 wave pattern (green) within wave C (orange).
2. The bearish bounce seems to complete a wave 1 (orange). This was followed by a retracement in wave 2 (orange).
3. There are potential trade setups at the resistance trend line (orange) for a bearish bounce (orange arrow). Also a bearish breakout (orange arrow) could be an option.
4. The main targets are located at the Fibonacci levels. The -161.8% Fibonacci level is located at 1.1915, which is usually the main target of wave 3 (grey).

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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