Euro/Dollar: Top Done?
I believe that EUR/USD has reached an important maximum at 1.1470 and that the dollar is going to appreciate against the euro in the next weeks. I estimate an 80% success rate trade based on two primary analytical approaches.
Technical Analysis Factor
The medium-term daily chart shows EUR/USD approaching a key resistance zone. The price action at 1.1470 looks like a textbook top formation.
On the short-term chart, there is a clear bearish head and shoulder pattern that has already broken its neckline.
The broken neckline is at 1.1270. The price is now in no-man's land between the broken neckline and the support of the channel below. If that support breaks too, the downside extends significantly.
Fundamental Analysis Factor
The sentiment is that:
- The ECB is going to increase QE (euro bearish)
- The Fed is expected to raise interest rates (dollar bullish)
Both technical and fundamental analyses align: bullish for dollar, bearish for euro.
Trading Setup
Traders could approach this in two ways:
- Enter short immediately at current market price
- Wait for a retest of the broken neckline at 1.1270 for a better risk/reward entry
Stop Loss: 1.1400 or 1.1480 depending on entry point
Risk Management: Maximum 2% of equity per trade
Target: Support channel level, with potential for further downside if that breaks
Remember that 80% is not 100%. Always use a stop loss and manage your position size accordingly. The market can always surprise us.