Last week was another bearish victory. They managed to draw another long red candle on a weekly chart, indicating that they are the dominant force for now. The downswing that occurred during the past week was mainly influenced by a big Head and Shoulders formation that was created on a daily chart starting from the middle of January. On Wednesday, sellers managed to break the neck line (red line). What is more, they went through the blue line as well which was a mid-term uptrend line connecting recent higher lows. Another success for bears was breaking the 1.3265 support (upper green area) that was a very important level in the second half of January.
Friday did not bring any further downswings and buyers managed to hold the position above 1.3140 which is the closest support for now. This week started with a small bullish gap that was already covered. The main trading signal is sell according to the H&S formation and the breaking of the trend line. On the other hand, we can still suspect a bullish reversal aiming at the 1.3265 resistance and the neck line. This scenario is very common in this type of formation, so traders should brace themselves for this possibility. Nevertheless, sellers seem pretty strong and confident. So the best possible way to trade EUR/USD is to use current high levels to open long-term short positions as the minimum target for the H&S has not yet been fulfilled.
Friday did not bring any further downswings and buyers managed to hold the position above 1.3140 which is the closest support for now. This week started with a small bullish gap that was already covered. The main trading signal is sell according to the H&S formation and the breaking of the trend line. On the other hand, we can still suspect a bullish reversal aiming at the 1.3265 resistance and the neck line. This scenario is very common in this type of formation, so traders should brace themselves for this possibility. Nevertheless, sellers seem pretty strong and confident. So the best possible way to trade EUR/USD is to use current high levels to open long-term short positions as the minimum target for the H&S has not yet been fulfilled.