Weekly Chart
© Dukascopy Bank SA
While the pair has been trading healthily inside of the pitchfork of the latest surge which added 32% over the one-and-a-half year period, it has tested the bottom boundary of the rising broadening wedge twice already, suggesting that the trend-line is losing strength and might give access to levels below – a scenario supported by the bearish nature of the pattern. This week will therefore be crucial for determining future steps depending on whether the rate will close above or below the trend-line. The Parabolic SAR is, however, still giving out BUY signals – no surprise due to the lagging nature of the indicator.
Daily Chart
© Dukascopy Bank SA
In a close-up on the daily chart it can be seen that the pair has sketched a head and shoulders pattern. The head lies at 0.9038 – the October high, but the execution of the second shoulder is now experiencing hitches due to the wedge bottom trend-line, strengthened by a Fibonacci level, being on the way. Nevertheless, we will look for the area to break in an ultimate bearish signal which could imply a gloomy outlook for quite a while. The pattern is expected to be violated over the next couple of days, leading to a steep dip below around 0.8347, where the neck-line lies. We should, however, consider the potential of a retracement after the area is broken, meaning that the pair could bounce off the neck-line at first in what will appear to be an attempt to establish a trading range but will actually be just a correction of the broken pattern. This means that a fail to dip underneath the neck-line on the first attempt should not lead to a conclusion that the head and shoulders has been false.
Four-hour Chart
© Dukascopy Bank SA
To make the picture even more bearish, the four-hour chart has developed another head and shoulders pattern, which has also hit the senior trend-line and is struggling to push below. The rate is experiencing some pressures to stick to the median line of the Andrew's Pitchfork, which also requires a break below the senior trend-line. We will consider 0.8477, the neckline of the junior head and shoulders to serve as a benchmark for all the areas in bearish territory, meaning that weakness below the level would immediately set the target at 0.8347, the senior neck-line.