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The EURUSD has been in a steady downtrend since Nov 09. With that comes the expectation that a reversal or retracment is possible. However I would caution against thinking it couldn’t go lower….there are no boundaries to what the market can do. As traders it is our job to look for indicators that may be pointing to a potential outcome.
In studying the daily chart we can see that there has been support at 1.2150 during May 2010 and then a new low in June at 1.1900 area. The pair has now moved back above the 1.2150 support area and this week has been decending from the highs at 1.2450. Here is where the potential trade setup is shaping up. If it falls back to 1.2150 the reverse head and shoulders reversal pattern has potential to bounce the pair back up and could indicate a reversal in the trend. This is just potential….if it breaks that same 1.2150 area we could see a test back to 1.1900. I have attached two images to illustrate the setup.
This potential setup could take a few weeks to develop.
EURUSD Daily Chart
Reverse Head and Shoulders illustration
