EUR/USD has formed a textbook head and shoulders pattern on the daily timeframe, with the neckline at 1.0720 now decisively broken.
Pattern Structure
- Left Shoulder: 1.0850 (May 15)
- Head: 1.0920 (May 28)
- Right Shoulder: 1.0830 (June 8)
- Neckline: 1.0720 — broken on June 16
Measured Move Target
The height of the pattern (head to neckline) is approximately 200 pips. Projecting this from the neckline break gives a target of 1.0520.
Key Levels to Watch
| Level | Type | Significance |
|---|---|---|
| 1.0720 | Resistance (former support) | Neckline retest zone |
| 1.0650 | Support | March low |
| 1.0550 | Target | Measured move |
| 1.0500 | Psychological | Round number |
Indicators Confirm
The RSI(14) at 38 shows bearish momentum without being oversold yet. MACD has crossed below the signal line and the histogram is expanding — confirming acceleration of downside momentum.
Pattern traders should note: head and shoulders completions have approximately a 65% success rate in reaching the measured target. Always use a stop loss above the right shoulder.
Trade Setup
- Entry: Sell on pullback to 1.0710-1.0720 (neckline retest)
- Stop: 1.0780 (above right shoulder)
- Target 1: 1.0600 (1:2 RR)
- Target 2: 1.0520 (measured move)