Technical Traders definitely enjoy the latest trading on the main pair – EURUSD. Since August, the price created a huge Head and Shoulder formation (grey rectangles), which is a reversal pattern. At the end of the last month, the sell signal was triggered, when on the 26th of October, the price broke the neckline (light blue) around the 1.168.
One of the most important principles of the Price Action says that broken support needs to be tested as a resistance. That is exactly what happened here. The price climbed higher, inside of the flag formation (red lines) and tested the neckline from the bottom. Price was rejected there twice, each time creating a long head on the H4 candles. After this, we got a bearish breakout from the flag, confirming the sell signal on the EURUSD. Monday so far just proves the bearish point here – the price is making new lows, firmly heading towards the bottom from the 27th of October.
A potential long-term target for the current sentiment is 1.128 (orange). That was an important resistance when Trump got elected as a President and it was later proven in June and July. The sell signal will be denied once the price will come back above the neckline but chances for that are currently rather limited.
This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis