EURUSD breaks major horizontal support

The past few days for the euro have been pretty dramatic. All of the pairs with the euro as the base currency are in the red. In this piece, we will focus on the most popular instrument on the Forex market – EURUSD.

Last week was a real roller-coaster for this pair. In the first half of the week we received a buy signal, which was triggered by the inverse head and shoulders pattern (yellow) and the breakout of the neckline (upper blue). That bullish action got quickly denied and became a false breakout pattern. Instead of the iH&S formation, we finally got a flag (green lines). EURUSD broke the lower line of this pattern, which brought us a proper sell signal.

The beginning of this week brought us a further slide, which broke an important horizontal support – the psychological barrier at 1.13 (lower blue). As long as we stay below this line, sentiment will remain negative. According to the price action rules, that area could soon be tested as a new resistance. Any bearish price action on the blue line should be treated as an invitation to go south.

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