EUR/USD 1H chart 5/22/2013 10:30PM EDT
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Bernanke: Before looking at the technical development, let’s remember to monitor Bernanke’s testimony Wednesday (5/22) at 10:00AM EDT. Mention of a plan to taper QE could give USD further boost and pressure the EUR/USD.
Inverted head and shoulders: The EUR/USD has been bearish in the short-medium term since retreating from the May 1 high of 1.3241. This week however, the market has given EUR/USD support from about 1.28 slowly edging up above 1.29 ahead of the Bernanke risk event. Looking at the 1H chart, this consolidation has formed an inverted head and shoulders pattern.
Basically, EUR/USD has put in a very short-term bottom. If Bernanke does not bring in further USD strength, the market should respect the bottom action and continue higher to test the 1.3030-1.3050 resistance pivot area.
Flag pattern: As it completes the kilroy (inverted H&S), EUR/USD is also forming a near-term flag pattern as seen in the 1H chart. The relatively tight price action shows that the market is not ready to rebound from its tentative bottom yet. In fact, if the reaction after the Bernanke testimony is USD-positive and EUR/USD slides below the flag pattern and below a key support pivot around 1.2840, we could be looking at bearish continuation at least to retest the 1.28 low and perhaps open up towards the 1.2744, 2013-low.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.