Euro – Major Reverse Head and Shoulders

Euro – Major Reverse Head and Shoulders

Euro – Major Reverse Head and Shoulders

On a technical basis, there is a major reverse head and shoulders pattern in the EUR/USD with 1.1485 (lets say 1.15) as the neckline. If the currency pair breaks and closes above this key level in a meaningful way, the next stop will be 1.1850. However as we all know, the outlook for EUR/USD hinges entirely on how the Greek debt negotiations go down. If there is a deal, the euro will soar and take out 1.15 easily. However if there is no deal, then 1.14 and change will once again mark the top for the currency pair. Until there is a deal, the neckline should continue to cap gains.

Next week is important. We are 10 days away from the June 30th deadline when Greece owes the IMF more than a billion dollars and without a new bailout package, they will be in default. The action starts with an emergency summit on Monday evening. Both Tsipras and Merkel will be in attendance so the decision makers are in place but whether either side concedes remains an open question. If an agreement is not made at the time, the next key event risk is the special summit planned for June 25-26. These two meetings are the last official opportunities for a deal to be reached but if it becomes necessary we are certain that emergency meetings will be held on a daily basis into the weekend and the June 30th deadline. The ECB has already extended a lifeline to Greek banks by raising its emergency funding and we are optimistic that in the eleventh hour an agreement will be reached but if we are wrong and Greece defaults, EUR/USD could drop more than 5%.

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