The euro/dollar (EUR/USD) is testing the neckline of a bearish head and shoulders pattern. Price has found support at the neckline just now. The next retest could take price down to a new lower swing low.
THE TARGET
The measured move for this type of reversal pattern is the perpendicular distance from the peak of the pattern to the neckline, extended from the breaking point of the neckline.
I have shown a measured move from nearby levels but should price decide to test the 50 DSMA (daily simple moving average, blue line) the break point will be a little higher. Note the measured move is often a minimum distance for this type of pattern, but should we reach it I recommend tightening your stop and protecting profit. The other MA (moving average) is the 200 DSMA (gold line) the 50 DSMA needs to maintain the bearish crossover and stay below to keep this forecast alive.
KEEP AN EYE ON THESE LEVELS
Price trading above 1.30773 would have me question the pattern. Stops can be placed just above this area. Bottom line? It’s worth keeping an eye on this formation.
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Learn how to use Elliott Wave in this article series by Madden.
