EURUSD Bearish Trend may continue pushing the price lower again while residing below 1.1200 area. Despite the bullish momentum, the trend is still bearish and has greater probability to move lower. Let’s check EURUSD Technical Analysis for more levels and insights.
January 16, 2020 | AtoZMarkets.com – EURUSD has been pushing higher after the recent bounce off 1.1100 area. The price did manage to sustain the bullish momentum till now but bearish pressure is still quite strong in the pair. Despite the Historic Trade Deal with China, U.S. Dollar did not show any remarkable gain against EURO today.
U.S. and China Trade War is currently at a pause. Recently, both countries has completed signing on a partial trade agreement. As of the deal, U.S. reduced tariff on Chinese goods from 15% to currently 7.5%.
No Gains on USD till now
After the first phase of trade agreement between U.S. and China, most of the market participants expected USD to gain certain momentum against other currencies. Despite having a positive advantage, the currency is still quite unchanged and struggling to regain momentum against EURO. The price has been consolidating above 1.1150 area and may reach 1.1175 resistance soon.
image: EURUSD 4 Hour Chart
While progressing higher above 1.1130 area, the price formed Bearish Continuous Divergence yet to complete. The price did show certain bullish rejection along the way but a strong rejection off 1.1175 may help the currency to regain momentum. As the price progress higher towards 1.1175 to 1.1200 area, volatility may increase leading to strong reversal of the bullish pressure.
EURUSD Technical Analysis – Head and Shoulder in the making
image: EURUSD Daily Chart
According to Daily chart, the price is consistent with the bullish pressure while heading towards 1.1175 area. The price is residing above the dynamic level 20 EMA after confirming the bullish pressure. Currently, the price is forming Head and Shoulder pattern as the Second Shoulder of the pattern is in the making. The First Shoulder formed at 1.1175 area on December 17, 2019 and Head was formed at 1.1240 area on December 31. If the price manages to remain bearish below 1.1175 area with a daily close in the coming days, then the overall Head and Shoulder pattern will be visible.
Therefore, if the price manages to form a Head and Shoulder pattern, the neckline will be at 1.1100 area. The Head and Shoulder pattern will only be valid when the price break and close below 1.1100 area. According to 3 Point Lower High method, certain rejection off the 1.1175 area with a daily close will partially confirm the pattern for further downward momentum.
As of the current scenario, the price may have bullish counter while remaining below 1.1200 area with a daily close. Certain bullish rejection below 1.1200 will led to continuation of the bearish bias in the pair. As a result, it can push the price lower to 1.10 area again.
To conclude, EURUSD has higher probability to be Bearish Again below 1.1200 resistance area. Despite the recent bullish pressure, certain bearish momentum is in the making.