If you have been following the Forex Analytix analysis for the last few months, you have known we have been looking at this chart for most of 2022. Now that we are breaking lower, there are a few technical things we must pay attention to.
The head and shoulder pattern was playing out lower while we traded below the 4070 level. Key support overnight was at 3962 and only a break back above the 4100 level would take the downside pressure off.
Originally, (see dotted horizontal line), we thought we may need a few more weeks to develop the right shoulder to create better symmetry of the setup. However, this will be a key week as CPI is being released on Wednesday.
A hot print could allow for further weakness in the S&P 500 and a weaker inflation print could allow for a re-test of the 4100 neckline of the setup. Daily RSI was remaining divergent, but not yet oversold. Downside targets of this pattern would target 3400-3500.
