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EUR/USD: When Technical Patterns Conflict |
The EUR/USD has been in a consolidation pattern in both the short and long-term. Since a precipitous fall at the beginning of the year, the pair has been trading within a wide range, which can be seen within the Fibonacci retracement levels in the chart below. 
And in the past six weeks the pair has been range-bound within the top two strata of our Fib study, consolidating and waiting for a break in some direction.
This week, we can see the completion of two technical patterns which offer conflicting predictions of where the EUR/USD is likely to go. The two patterns are a Head and Shoulders (often an indication of a reversal) and a Bullish Wedge (often indicates a continuation of the trend.) See charts, analysis, videos and data by clicking on the flags
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Essential Reading for Traders
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| | | | | The chart below has the Wedge drawn. So what do you do when you've got conflicting patterns on your charts and in your analysis?
Even proper analysis can lead to conflicting conclusions, and it can confuse a lot of traders, causing them to become paralyzed in their trading, or worse make bad decisions.
When the analysis conflicts, simply wait for confirmation.
On the EUR/USD, a long-term trader wouldn't consider placing a bullish trade until confirmation comes in the form of a breakout above the 1.44 level. A short term trader might place a short term trade after a bounce at support around 1.37, which would also be a break from the wedge.
A bearish signal would likely come as a break through support at the 1.37 level, although the potential for consolidation between 1.35 and 1.37 would not be a surprise.
Next: Understanding Technical Patterns
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