Two Heads are Worse than One
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Back on March 7th, I presented a potential head and shoulders formation for the Euro currency (see Euro Currency Sporting a Potential Head and Shoulders Top). Here is an update of that chart. After 'popping and dropping' back below the neckline (seen in red), the Euro has begun moving lower beneath the 130.00 Euro/USD area. The head and shoulders topping pattern remains in place and suggests a lower Euro/USD. In addition, the consolidation area placed along the neckline has elicited a second smaller potential complex head and shoulders pattern. It could be that two heads are worse than one. The patterns with necklines in red can be seen on the updated chart below.
The recent European election results, with their anti-austerity implications, combined with the apparent 'on hold' position of our Fed, certainly present a backdrop that would seem bearish for the Euro. Bearish fundamentals together with bearish chart formations will be difficult for the Euro to overcome; and a falling Euro has accompanied tough times for stocks previously. However, nothing can be guaranteed, especially considering that central banks can step in at any moment and alter currency policies. Finally, please remember that potential head and shoulder chart patterns are subject to possible failure. This pattern would be negated if the Euro turned upward and breached the 135.00 Euro/USD area with momentum.
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