EUR/USD Bulls on Edge as Head-and-Shoulders Pattern Signals Risk of Slide Towards 1.1100
Technical Analysis:
EUR/USD staged a modest intraday recovery on Friday, paring earlier losses after touching session lows at 1.13175 in European trading. The pair eventually stabilized near 1.1380 late in the New York session, ending the day slightly lower by just -0.07%. While late-session support emerged, aided by a pullback in U.S. yields, a softer U.S. dollar, and cross-related EUR/JPY gains, the inability of EUR/USD to break decisively above the critical resistance level at 1.1400 is concerning for bullish traders.
Technical indicators highlight increased downside risks. A potentially bearish head-and-shoulders formation is clearly developing on the daily charts, with the neckline support residing firmly at the 1.1310/15 area. Notably, the daily RSI is declining steadily, indicating growing short-term bearish momentum. Should EUR/USD breach and close decisively below the neckline, the bearish pattern would be confirmed, targeting a measured move down toward the significant 1.1100/50 support area—historically important resistance-turned-support from earlier trading phases.
Despite short-term bearish developments, monthly indicators continue to suggest broader bullish resilience as long as EUR/USD remains above the key support zone at 1.1150/1.1200. Traders should closely monitor price action near the neckline at 1.1310/15. A successful defense of this level and a subsequent push back above 1.1400 would likely negate bearish pressures in the short-term and signal a resumption of the underlying bullish trend. Conversely, a confirmed breakdown below 1.1310 opens substantial downside risk toward 1.1100, supported fundamentally by an improving sentiment toward U.S. assets.