A bullish engulfing daily candlestick emerged off price level of 1.2500 one month ago. A resulting bullish movement towards 1.2850 was contained within the depicted channel.
The upper limit of the movement channel (1.2880-1.2900) was targeted. However, bearish pressure was applied earlier around 1.2800-1.2840 where the depicted head and shoulders reversal pattern was initiated.
A bearish breakout off the bullish channel took place shortly after, thus confirming a Flag continuation pattern. Initial daily target level was located around 1.2490.
Daily fixation below 1.2490 (the origin of the previous bullish swing expressed one month ago) theoretically extends the bearish targets towards price level of 1.2200 (projection target of the bearish flag pattern).
The market expressed quite strong bearish momentum that went further below the lower limit of the previous bullish channel.
As depicted on the chart, the EUR/USD pair has been respecting the limits of the current bearish channel so far.
As anticipated, price levels around 1.2750 (upper limit of the channel) provided a valid SELL entry. Quick decline took place towards price level of 1.2450.
As anticipated, daily closure below 1.2480 offered another SELL signal for risky traders. Target levels were located at 1.2440, 1.2370 (already reached) and 1.2290.
Another Short position was offered at retesting of the recently broken DEMAND zone at 1.2450-1.2500 ( also corresponding to the upper limit of the channel ). Stop loss can be set as a daily closure above 1.2520.
Bearish targets are located at 1.2370 and 1.2290 as long as the recent top at 1.2500 remains defended by bears.
The material has been provided by InstaForex Company – www.instaforex.com