EUR/USD Head And Shoulder Pattern Kick Starts Bearish Outlook

• EUR/USD made a bearish reversal when testing the previous top. As expected in our previous analysis, price action made a bullish ABC pattern.
• The EUR/USD is expected to make a full bearish price swing in wave C (pink) after completing a bullish wave B.

Price charts and technical analysis

The EUR/USD is expected to make a full bearish price swing in wave C (pink) after completing a bullish wave B (pink):

1. The EUR/USD made a head and shoulders reversal chart pattern (red boxes). There were also divergence patterns between the tops (purple lines). A strong bearish impulse is expected to be wave 1 (grey).
2. Price action needs to confirm this bearish outlook by breaking and closing (orange arrows) below the 21 ema zone, 144 ema zone, plus support trend line (green).
3. Currently a bullish ABC (orange) is expected to complete a wave 2 (grey).
4. A break below the -61.8% Fibonacci level confirms a wave 3 (rather than a potential wave C).
5. A break above the previous top invalidates this bearish outlook (red circle).

On the 1 hour chart, price action is moving up and down around the 144 ema zone. Usually this indicates a larger range or reversal:

1. The bulls seem to have completed a 5 wave pattern (green) within wave C (orange).
2. The bearish bounce seems to complete a wave 1 (orange). This was followed by a retracement in wave 2 (orange).
3. There are potential trade setups at the resistance trend line (orange) for a bearish bounce (orange arrow). Also a bearish breakout (orange arrow) could be an option.
4. The main targets are located at the Fibonacci levels. The -161.8% Fibonacci level is located at 1.1915, which is usually the main target of wave 3 (grey).