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EUR/USD: Long-Term Reversal Signals (April 15, 2013)

EUR/USD has been having a difficult time breaking past the 1.3100 major psychological resistance level. 

After all, this area has served as support and resistance in the past as plenty of buyers and sellers are keeping a close watch on this level.

On its daily time frame, EUR/USD looks ready to form a head and shoulders pattern with the right shoulder forming around the 1.3100 mark. That’s in line with the 38.2% Fibonacci retracement level. Take note that stochastic is in the overbought region on the same time frame as well.

The pattern is roughly 700 pips in height, which suggests that the potential breakdown could be the same. However, one might want to trade the actual formation of the right shoulder to catch the potential reversal early.

eurusd.20130415

On shorter-term time frames, EUR/USD has been consolidating in between 1.3050 and 1.3100 so it might be more prudent to wait for a breakdown below the support level to ensure that enough downward momentum is taking place.

Note that Cyprus is still undergoing some challenges with its bailout situation as a recent debt sustainability report revealed that they’d need to look for an additional 6 billion EUR to weather the effects of the fiscal tightening measures on their economic growth. Some say that a second bailout might be in the works, which could be very negative for the euro.

By Kate Curtis from Trader's Way

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