EUR/USD Bullish Reversal Patterns Emerge At 1.17 Support Zone

• EUR/USD is testing a key 38.2% Fibonacci level on the daily chart. A bullish bounce did take place at the 23.6% Fib. Will the next Fib also act as support?
• EUR/USD seems to be completing a bearish ABC (grey) pattern at the 38.2% Fibonacci level (blue box). We expect the Fib to act as support and create a bullish move.
• A potential inverted head and shoulders reversal chart pattern could emerge. A break above the neck line and resistance (orange) is needed to confirm that reversal pattern.

This article will review price patterns and the potential for a bullish reversal to take place.

Price charts and technical analysis

The EUR/USD seems to be completing a bearish ABC (grey) pattern at the 38.2% Fibonacci level (blue box). We expect the Fib to act as support and create a bullish move, either a small correction or a larger reversal:

1. A bullish reversal (green arrows) could take place if price action is able to break above the 21 ema zone on the daily chart.
2. The main upside targets are the deep Fibonacci retracement levels at the 78.6%, 88.6% and previous top. A bearish reversal back down is expected there due to the larger ABC (pink) pattern in wave 4 (purple).
3. A strong bearish bounce at the 21 ema zone or an immediate breakout below the 38.2% Fib indicates more downside pressure (orange dotted arrows). In that case, price could decline towards the 50% and 61.8% Fibonacci levels.
4. The wave 4 pattern, however, becomes less likely if price action breaks below the 38.2% Fib. It could indicate a downtrend instead.

On the 1 hour chart, there are signs that a bullish reversal could take place. But of course, a reversal is always risky as the trend could be strong enough to continue. Here are the main factors:

1. A divergence pattern (purple lines) is visible between the bottoms, which is indicating that the bears are losing steam.
2. A potential inverted head and shoulders reversal chart pattern could emerge (green boxes). A break (green arrow) above the neck line and resistance (orange) is needed to confirm that reversal pattern.
3. Price action has reached a strong support zone with the 38.2% Fib from the daily chart, the Wizz 7 level and the 1.11750 round level zone.
4. Although price action has already closed above the 21 ema zone for the second time, a bullish breakout (green arrows) above the resistance (orange line) could confirm the reversal.
5. The upside could either be an ABC or 123 pattern. This depends on how strong the price moves up. The main target for the wave C is the -61.8% Fib at 1.17944 and the wave 3 is at the -161.8% Fib target at 1.18950.