Although currency bulls managed to invalidate a small breakdown under the lower border of the rising trend channel, they failed to go further north. What stopped them? How did their opponents behave in the face of this event? What does all this mean for the U.S dollar and the Swiss franc? You will find the answers to all these questions in today’s alert.

EUR/USD – One More Time

Yesterday, the exchange rate slipped to the green support zone, which was strong enough to stop the sellers in the previous months. As you see, they have fallen in this area so many times that there was a reasonable risk that history would repeat itself once again and we would see another rebound from here in the coming days.

Thanks to this assumption, we decided to close our short positions (not only in EUR/USD, but also in GBP/USD) and take profits off the table (for those who are not yet our subscribers, we inform that we opened them when EUR/USD was trading at around 1.1725 – we marked this level with a green dashed horizontal line).

As it turned out after our Forex Trading Alert was posted, EUR/USD bounced off the green support zone as we had expected. Earlier today, the pair extended Monday’s move, which shows that our decision to take profits off the table was right.

What’s next for the exchange rate?

Taking into account the current position of the daily indicators (the Stochastic Oscillator generated a sell signal, while the CCI is very close to doing the same), we think that the pair will test the previously-broken orange line based on the late June and mid-July lows (the neck line of the head and shoulders formation) in the very near future.

Nevertheless, observing the charts of EUR/USD and the USD Index, we noticed that many times in the past currency bears had problems with realization of the pro-declining scenario based on the head and shoulder s pattern.

Therefore, it seems to us that further improvement above this resistance line can’t be ruled out. If this is the case and we see an invalidation of the earlier breakdown (under the orange line and the lower border of the brown rising trend channel), EUR/USD can climb even to the red declining resistance line based on the previous peaks (currently around 1.1725) in the following days.