A complex head and shoulders pattern seems to be forming on EUR/USD’s 4-hour time frame, as the pair is testing the neckline around the 1.3500 handle.
However, stochastic is in the oversold region, hinting at a possible short-term bounce. If the pair is unable to break past the recent highs though, it might suggest that buying pressure is very weak and that a strong selloff might be in the cards.
Waiting for a break of 1.3500 and setting a stop above 1.3600 for a short trade would be a 4:1 potential reward on risk with a target of the previous lows around 1.3100.
By Kate Curtis from Trader’s Way