EUR/USD Forex Signal: Bearish Head & Shoulders?

Adam Lemon

EUR/USD: Signs that price is topping out in the 1.2250 area. 

Last Thursday’s EUR/USD signals were not triggered, as there was insufficiently bearish price action when the resistance level identified at 1.2209 was first reached. However, this level was accurate as strong resistance.

Today’s EUR/USD Signals

Risk 0.75%.

Trades must be taken prior to 5pm London time today.

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2233 or 1.2277.
  • Put the stop loss 1 pip above the local swing high.
  • Adjust the stop loss to break even once the trade is 20 pips in profit.
  • Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.2209 or 1.2129.
  • Put the stop loss 1 pip below the local swing low.
  • Adjust the stop loss to break even once the trade is 20 pips in profit.
  • Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

EUR/USD Analysis

I wrote last Thursday that although an up day looked marginally more likely than a down day, bulls would probably struggle to push the price might higher.

I thought that the best approach to trading this currency pair would be to take cautious long trades if the resistance levels at 1.2209 and 1.2232 respectively become invalidated.

I was mostly correct, certainly about watching the level at 1.2209 which held very firmly and signalled that the price was not going to make any meaningful rise.

The Dollar has weakened over the past few days, and the Euro has risen to challenge recent highs. The British Pound, which is typically highly correlated with the Euro, is breaking at the time of writing to new multi-year highs. Yet we see a divergence between the Euro and the Pound, with the price chart below showing what looks to be the completion of the final shoulder in a medium-term bearish head and shoulders chart pattern. However, for this bearish pattern to complete, the price will have to break below 1.2160.

I think the best thing for traders to do with this currency pair is to wait for a daily close below 1.2160 for a bearish signal or above 1.2260 for a bullish signal. In the meantime, shorter-term trades such as scalps can be possible long from 1.2200 – 1.2209 area or short from 1.2233.EURUSDConcerning the USD, there will be a release of ISM Manufacturing PMI data at 3pm. There is nothing of high impoprtance due regarding the EUR.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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