FX Technical Outlook: EURUSD forming a head and shoulders pattern

By Orbex Last updated Oct 31, 2021

Key Points:

EURUSD is forming a potential head and shoulders pattern which could see declines to 1.08
USDCAD is likely to reverse near 1.2865 and start a new correction higher validating the cup and handle pattern

EURUSD has formed a doji near the support/resistance of 1.1373 – 1.1320. A bearish follow through from here with daily closing prices below 1.1320 could signal the start of a bearish decline to the downside. Mind the evolving head and shoulders pattern on the daily and weekly chart which could see prices extend losses towards 1.08. Of course, this view will be validated only on a close below 1.1157 followed by a break below 1.105 – 1.1028 major support. To the upside, while prices remain capped near the 1.1373 – 1.1355 resistance level, a break above this price zone could see EURUSD challenge 5th March highs of 1.14890.

EURUSD (1.135) - Potential head and shoulders in the making — EURUSD (1.135) – Potential head and shoulders in the making

USDJPY fell sharply to test the 29th April close near 106.40. So far price held above this level, but USDJPY remains capped near the support/resistance level of 108.18 – 107.70. A daily close above this level could see USDJPY clear the first major hurdle in the run up to 116 resistance. Above 108.80, the next level of interest is the 111.0 resistance which was tested just a few weeks ago. In the near term, USDJPY could remain in a consolidation phase within 111.0 and 108.80 levels. A break below 108.80 could, however, signal potential weakness in USDJPY leaving prices vulnerable to fall towards 105.

USDJPY (107.7) - Consolidation below 111.0 if prices close above 108.18 support/resistance — USDJPY (107.7) – Consolidation below 111.0 if prices close above 108.18 support/resistance

GBPUSD is seeing sharp consolidation at 1.45 – 1.44 levels. However, further upside could be likely on a close above 1.4512 resistance level. With prices moving in the upward channel, the potential for more gains is likely in the near term. 1.4668 will be the immediate resistance that could challenge GBPUSD’s upside momentum, but as long as prices remain supported above 1.4512, the bias remains to the upside. Alternately, failure to break above 1.4512 could keep GBPUSD range bound with the risk of a decline to 1.420.

GBPUSD (1.45) - Further upside if prices close above 1.451 — GBPUSD (1.45) – Further upside if prices close above 1.451

USDCAD continues to edge lower, but prices have staled below 1.2865. From last week’s analysis, we signaled to watch for a potential cup and handle pattern with a possible reversal near 1.2865. A bullish reversal or a doji at the current levels could signal the change of trend in USDCAD and a break above 1.313 could signal the start of a longer term correction towards 1.3690.

USDCAD (1.282) - Watch for possible reversal at current levels — USDCAD (1.282) – Watch for possible reversal at current levels

USDCHF is currently trading near the dynamic support off the lower median line. A close above the resistance/support region near 0.97740 could signal a move to the upside towards 0.9928 as the next level of interest. Failure to close above the resistance of 0.9774 could see USDCHF turn weaker and slide towards 0.9540, keeping prices range bound.