In my previous blog, I was already foreseeing the forming of a Head & Shoulder in the Dollar Index. As shown in the image above, the price has bounced off the support (neckline) marked by the blue horizontal line. As you might have noticed, I have drawn two arrows to indicate a possible dual move. Below the white oblique resistance line, I expect to see the US Dollar re-testing the support at around 100.00/99.80 price area. Once the price breaks the white resistance line, the USD currency will be ready to put on the right shoulder.
This coming week, traders as well as financial analysts will listen to central bankers speaking and will also find out if the FED will keep the US interest rate unchanged – no change is foreseen as of yet. On Friday everyone will have their eyes glued to the screen when the new NFP data is released.
Whilst the Dollar Index is forming the reversal pattern discussed above, the EURUSD is forming a reversal pattern called Inverted Head & Shoulder, which is the same pattern but reverted. If you stop and think, this pair does the opposite of the Dollar Index most of the time, which is why the next move is so predictable.
The EURUSD price is currently sitting at a support marked by the yellow oblique line. If that support holds, I see a buy opportunity for this currency pair. If the buy comes through, we need to pay attention to the neckline resistance marked by the light blue horizontal line. Breaking that resistance will not mean a negation of the inverted pattern but merely a confirmation of the Rising Wedge pattern which will indicate a sell is near.
Trade idea: This week, even though a dual outcome could happen, I will be looking first and foremost at buying the Euro vs US Dollar since the Euro has been bullish for the past few weeks. First buy target 1.0750/70 price area. If the first target is broken, I will look to go to second target 1.0800/50. The second target price will depend on how fast the price will move up, as I am looking to bounce off the Rising Wedge resistance wall, marked by the dark blue line.
Written by Elkana Roveglia – www.TakeMyTrades.com