I wrote about the potential for a EURUSD move back to parity on March 7th as the euro was testing the neckline of a 520-pip head and shoulders pattern.
However, the EURUSD never closed a day below 1.0540 support, so the bearish reversal never quite set up.
We then saw the pair take out the 1.0690 highs, but Wednesday’s candle confirmed that as a bearish fakeout, and the EURUSD is right back to neckline support.
The US Dollar Index (DXY) also managed a 104.12 reclaim on Wednesday.
I discussed this potential in last Saturday’s weekly forex forecast video.
Wednesday’s DXY reclaim puts the bullish-dollar scenario front and center.
And as we’d expect, the dollar index is carving a potential inverse head and shoulders with a neckline/trigger at 105.60.
A DXY daily close above 105.60 in the coming days would confirm the break and open up 107.80.
For EURUSD, 1.0540 is the level to get below on a daily closing basis.
That would confirm the head and shoulders pattern and potentially open up levels like 1.0230 and 1.0000 (parity).
However, note that the 1.0450 to 1.0480 area is key support for EURUSD.
Remember that the trigger for shorts is a sub-1.0540 daily close, so there is little to do until then.
Lastly, a DXY daily close below 104.12 and particularly 103.50, would invalidate the bearish EURUSD scenario discussed here.
