EURUSD – Inverse Head and Shoulders Neckline Broken

The possible inverse head and shoulders highlighted yesterday (EURUSD – Inverse Head and Shoulder Near 2015 Low?) was completed this afternoon thanks to the release of a weaker US retail sales report.

Coming in at 0.9%, below expectations of 1.1%, the retail sales figure prompted widespread dollar weakness, helping EURUSD to break above the neckline before running into initial resistance around 1.6035.

Aside from being a previous level of support and resistance, making it a logical level for the pair to take an initial breather, it is also consistent with the break of the inverse head and shoulders.

The size of the move from the second shoulder to the neckline projected above brings us to pretty much the exact same level. This is generally viewed as the conservative target when breakouts occur with inverse head and shoulders.

The more aggressive target tends to come from the distance between the head and the neckline being projected above the neckline, which would be around 1.0675. This roughly coincides with Friday’s high and therefore makes it another logical level of resistance.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.