EUR/USD, GBP/USD build opposite head and shoulders reversal patterns
The EUR/USD continued with its bullish retracement yesterday but the resistance at 1.1250 has so far stopped price from moving higher. As expected in yesterday’s analysis, the head and shoulders pattern (purple boxes) is a reversal pattern that could indicate a bearish bounce if price manages to break the neck line (light green) of that pattern. Such a rejection could occur when a bearish ABC (blue) zigzag occurs that could bring price back towards the bottom of the larger consolidation zone (purple/green lines).
The EUR/USD seems to have completed a bullish ABC zigzag (green) within wave B (blue). A move higher would still resistance at trend lines (orange/red) and Fib levels but a break above that zone would invalidate the current ABC (blue). A break below support (light green) could see the potential start of bearish momentum (dark red arrows).
The GBP/USD bearish price action seems to move correctively, which makes a larger ABC (light purple) the most likely wave structure at the moment. Price has retested the previous bottom and is stopping at the 78.6% Fibonacci retracement of wave B (light purple), which is the level of a potential inverted head and shoulders (purples boxes) reversal pattern. Price could either be in a wave E (purple) or wave 4 (pink), which depends on whether price moves above the 100% Fibonacci level (wave E) or stays below it (wave 4).
The GBP/USD break above resistance (orange) could see a bullish move higher but a break below the 100% Fibonacci invalidates the wave B (blue).
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