Bearish Reversal Pattern Forming In The EUR

As of the 1.2011 high in the EUR/USD reached Monday, the pair had advanced 1,375 pips or 12.9% off the 1.0636 low hit on March 23, 2020 (38-month low). The initial recovery was rapid as the EUR/USD closed the month of March at a 6-month high.

(Click on image to enlarge)

Now, there is a potential bearish reversal three drives to a top pattern forming in the EUR/USD. This pattern shows a series of higher highs and high lows, relatively close together. Given the rapid advance that occurred prior to the pattern forming, we can see how upward momentum slowed as the pattern formed.

Further evidence for a slowdown in upward momentum is indicated by the bearish divergence in the 14-day Relative Strength Index (RSI) oscillator.

(Click on image to enlarge)

A closer look at the formation of the pattern can be seen in the enclosed intraday 1-hour chart. Here we see that the highs of the last two up swings found resistance at point 2 and 3 respectively, right around the 127% Fibonacci extension of the prior down swings, measured from points 1 and 2.

If the EUR/USD does fall as the three drives pattern indicates that it might then watch for a decline to at least the 38.6% Fibonacci retracement around 1.1487, and likely to the 50% retracement around 1.1324.

Disclosure: Above analysis is for educational purposes only. Proceed at your own risk. All information given here is largely based on technical analysis and the analysis is very dynamic in nature and ...

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