In the last few months, the EURUSD has been difficult to trade, despite classic macroeconomic theory suggesting that we should buy the Dollar as the Federal Reserve is increasing interest rates faster and higher than the ECB. But in the last few months the EURUSD has refused to trade lower, and when I started my career, I worked for Swedbank Markets’ at their FX and FI desk, and the old traders used to say: “what refuses to trade lower, will probably trade higher.”
That idea is being echoed in the daily EURUSD chart; it appears that the price is creating the right shoulder of an inverse head and shoulders pattern, with the neckline going via the June 7 and September 24 highs. The head is the August low.
If the price is indeed forming a head and shoulders pattern, then a break to the September high of 1.1812 will be the time to turn bullish with an objective of 1.2323. Also, to keep the symmetry of the pattern I would prefer if the price did not trade below the October low. If the price indeed trades below the October low, then the price will probably trade to the August low of 1.1300, and the head and shoulders pattern will morph into something different.
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EURUSD Daily Chart