A Battle at the Neckline
24 August 2023
The EURUSD is in the spotlight today, with some intriguing developments on its daily chart. Observing recent movements, we can pinpoint a hammer candlestick from yesterday. This isn't just any ordinary hammer; it's situated right on the neckline of the pattern. This neckline, distinctively marked in red, belongs to a triple top formation highlighted in yellow. A pattern like the triple top usually spells reversal, especially when spotted after an upward trend.
The key area of interest here is the red neckline. A definitive close below it would confirm a breakout, heralding a strong long-term sell signal. Yesterday's action suggests that buyers were adamant about holding this line, aiming to maintain the bullish momentum that has characterized the pair's recent journey. Their defense of the neckline demonstrated their resolve, but today, the situation appears to be taking a different turn.
As trading unfolds today, it's evident that sellers are mounting another assault on the critical support level. This renewed pressure indicates an emerging weakness in demand, especially given that buyers couldn't capitalize on yesterday's hammer. Should the price settle below the red neckline by the end of the session, traders should brace themselves: a robust sell signal would be on the cards.
Looking further down the road, if this potential breakout does come to fruition, the subsequent target could be set around the 38.2% Fibonacci retracement level. However, given the significance of the triple top formation and its implications, there's scope for the pair to delve much deeper. Traders and investors would be wise to keep their eyes peeled, as the EURUSD's next big move might just be around the corner.