EUR/USD Forex Signal: Bearish Head and Shoulders Completing

Adam Lemon

The price is bearish below $1.1623.

Last Tuesday’s EUR/USD signal was not triggered as the bearish price action took place above the resistance level I identified at $1.1617.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered between 8am and 5pm London time today.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.1623 or 1.1668.

  • 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.

  • Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.1574, 1.1567, or 1.1536.

  • 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.

  • Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

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 Tuesday that the best approach would be to wait for a retracement to 1.1617 and another bearish rejection of that level from below with a firm bearish reversal should give a short trade entry with good potential.

This was a relatively good call but the bearish turn which could have been exploited came in a little higher than 1.1617.

Following the bearish break of the bullish price channel still visible in the price chart below, the bearish technical picture has steepened somewhat as a bearish head and shoulders pattern is nearing completion. The final shoulder on the right is capped by the resistance level at 1.1623 and the neckline sits at 1.1574.

This bearish pattern is backed up by the fact that the EUR/USD is in a weak but valid long-term bearish trend.

Normally in this situation I would look for a bearish reversal at 1.1623 to enter a short trade, with an entry also possible if the price breaks hard below the neckline at 1.1574. However, we have a central bank release coming up from the ECB which is likely to push the price around without respecting technical features, although sometimes such volatility can cause price spikes which quickly reverse and can be exploited. Therefore, I will wait until after 2pm London time to enter any trades, and I will take a rejection from either 1.1623 or 1.1668. It could also be possible to scalp a quick long trade from a spike down to 1.1536 or lower immediately following the ECB release.

There is also US data due which may cause a surprise and move the price.

EUR/USD

Concerning the EUR, the ECB will release its Monetary Policy Statement and Main Refinancing Rate at 12:45pm London time, followed by the usual press conference 45 minutes later. Regarding the USD, there will be a release of Advance GDP data at 1:30pm.

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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