Complex head and shoulders pattern on the EUR/USD

A few weeks back we identified a head and shoulders pattern on the EUR/USD over the daily chart with the neckline around the 1.1800 level, which was broken to take the pair to the 1.1700 level. We could say that such head and shoulders pattern was confirmed, but the drop was not too deep. On the last couple of weeks we saw that the EUR/USD pulled back to the 1.1900 level where it is trying to come back down. The pullback to the 1.1900 level is important, because the pair already bounced to the downside from that level on the 2^nd of august. Therefore, this bearish bounce from the 1.1900 level could be forming the right shoulder of a bigger pattern that includes the previous head and shoulders, that is why it is called a complex head and shoulder pattern. The pattern has two shoulders on the left and two shoulders on the right, the head is still the peak at the 1.2100 level. The neckline for the new pattern is the red trendline just below the 1.1700 level. If the EUR/USD breaks below the neckline, the pair may drop to the 1.1500 level, where we can find the 200 day EMA.

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The Dollar weakens

The Dollar index was retracing to the upside from the 91.00 zone to the 94.00 zone, breaking on its way up above the 55 day EMA as shown on the daily chart. During such bullish retracement the stochastics indicator rose from the oversold zone to the overbought zone in 20 trading sessions. However, during the last 4 trading sessions, the stochastics fell to the oversold area, indicating that this time the drop has been faster. Therefore, the index may fall to the 92.00 level and a breakdown below the 92.00 level it may visit the low at the 91.00 level. On the other hand, the US fundamentals may support the greenback in the next few months and the Dollar index may try to go back to the 94.00 level or even try to break above that level.

Copper follow up

Since the end of June to the beginning of September, copper had a very good bullish trend while the Chinese economy was showing signs of expansion. The health of the Chinese economy is positively correlated to the price of copper due to the fact that China is one of the main copper consumers in the world. Once the price reached the 317.77 zone, it started retracing to the downside until it reached the low at the 289.37 level, where we can also find the 55 day EMA as shown on the daily chart. Copper consolidated for a couple of weeks around the 55 day EMA until it started rallying again as the Chinese fundamental data became optimistic once more, causing the price to reach the 305.00 level. Today the bullish momentum accelerated and the price of gold reached the 61.8% Fibonacci retracement at the 306.86 level. The 61.8% Fibo may act as resistance for the commodity, but if it breaks that level to the upside, then the 76.4% Fibo has a higher probability of acting as a resistance. In case the price of copper comes back down, the 55 day EMA may act as support.

Pullback on the GBP/USD

The Pound versus the Dollar falls near the 1.3000 level, but it was not able to touch that level. On a second visit to the 1.3000 level, the pair may touch it, but it may be difficult to break that level to the downside, due to the fact that around the 1.3000 level we can see the 200 day EMA and the 76.4% Fibonacci retracement as shown on the daily chart. The GBP/USD is currently pulling back to the upside, but as shown on the chart the pair has touched exactly the 55 day EMA where it stalls at the moment. From the 55 day EMA, the pair may try to go back down, but if it continues to the upside, then the 1.3200 level along with the 50% Fibo could also act as resistance. Below the 200 day EMA, its next support level could be the 1.2800 zone. Another possible scenario is that the GBP/USD may stay bouncing up and down between the 200 day EMA and the 55 day EMA without taking a clear direction and consolidating for a while.

The drop accelerates on the GBP/USD

The GBP/USD continues dropping as shown on the daily chart and accelerates its bearish momentum below the 61.8% Fibo, around the 1.3100 level. The pair is retracing the rally that it made from the 1.2800 level to the 1.3600 level that took around one month to complete. At the moment, the GBP/USD is getting closer to the 1.3000 level, where we can also find the 200 day EMA (blue line) and the 76.4% Fibo. That zone has a high probability of acting as support due to all the factors coinciding around that area, but the fundamental data should also help the Pound regain some of the lost ground versus the Dollar, otherwise the pair may just continue falling. In case of a bearish breakdown below the 1.3000 level, its next support level could be the 1.2800 from where it started rallying, completing what it is known as a parabolic retracement of 100%. In case the pair bounces from the 1.3000 level to the upside, its next resistance could be the 1.3200 level where we can find the 55 day EMA.

Possible breakout-pullback pattern on the USD/CAD

The breakout-pullback pattern is completed when the price of an asset breaks an important support or resistance zone to then pullback to the same area and continue in the direction of the initial breakout. On the weekly chart of the USD/CAD we can see that the 200 week EMA (blue line) stopped the price on its first visit when it was falling from the peak at the 1.3800 level. The bounce from the 200 week EMA takes the price to the 1.2700 level, but then it bounces back down to visit the 200 week EMA for a second time, but on the second occasion, the price breaks below the 200 week EMA and makes a low around the 1.2069 level. From the 1.2969 level the USD/CAD bounces to the upside and reaches the 200 week EMA again where it is trying to stall at the moment. A breakout-pullback pattern may be completed on the USD/CAD if the prices bounces to the downside from the 200 week EMA, but the stochastics indicator has just come out of the oversold zone and still has enough room to continue higher; therefore, the USD/CAD may break above the 200 week EMA. On the other hand, the 200 period EMA usually acts as a very good support/resistance zone, especially on the higher timeframes, and this time it may work even better since it is coinciding with the 55 day EMA around the 1.2491 level.