EUR/USD: Buyers Eye Completion of Inverse Head and Shoulders Pattern

Market Overview

On Friday, 29th November, the EUR/USD pair experienced a pullback in dollar strength, largely due to reduced trading volume across North America. This dip in momentum gave room for other assets to make a stand. Major currencies such as the euro and the pound, along with Asian currencies, began to trade positively against the dollar despite a month of significant losses.

Technical Analysis

The EUR/USD pair, on the 4-hour chart, is currently at a pivotal moment as it approaches the neckline of an inverse head and shoulders pattern. The pair is teetering on the edge of confirming this bullish reversal structure. However, the confirmation relies heavily on the buyers successfully pushing the price above the neckline, which is situated around 1.05872. Should the buyers muster enough strength to breach this level convincingly, the subsequent upside targets will be 1.06029, 1.06110, and 1.06228. If the bullish momentum persists, the trend could further extend towards 1.06605, representing a broader recovery for the euro.

On the flip side, if sellers manage to regain control and reject the price at the neckline, they will aim to challenge the immediate support at 1.05652. Should the downward momentum intensify, the next crucial level would be the recent low of 1.05296. A failure to maintain support at these levels would signify a continuation of the previous bearish trend.

Momentum Indicators

Momentum oscillators are suggesting a potential shift towards a bullish outlook. The RSI is approaching an upward trend, hinting at increasing buying pressure. Moreover, the MACD has also transitioned into positive territory, with the MACD line comfortably above the signal line, which supports the narrative of a developing bullish trend. Meanwhile, moving averages point to an overall upward bias, further strengthening the probability of a potential upside breakout.

Key Levels

• Resistance Levels:
  • 1.06605 (Major Resistance Area)
  • 1.06448
  • 1.06228 (Potential Inverse Head and Shoulders Target)
  • 1.06110
  • 1.06029
• Support Levels:
  • 1.05652 (Immediate Support)
  • 1.05296 (Recent Low)

Key Events to Watch

Upcoming economic data releases from the eurozone are likely to play a pivotal role in determining the near-term direction of the EUR/USD pair. The German unemployment report and preliminary euro area inflation data, both set to be released later in today’s trading session, are expected to introduce significant volatility to the euro. Additionally, the U.S. market remains in an extended holiday period, and no major economic events are scheduled for the dollar, which means that the euro may experience less resistance from the greenback.

Conclusion

EUR/USD is at a critical juncture, with buyers looking to confirm a reversal pattern, potentially pushing the pair higher. A break above 1.05872 could trigger further gains, whereas failure to hold above support may see sellers reassert control, dragging prices lower.