Bulls Struggle To Defend The Lower Line Of The Flag Formation
Admirals | May 29, 2013 06:34AM ET
The EUR/USD is showing strong inclinations to head south. Yesterday's situation proved that bulls are rather weak and have no idea how to stop the recent downtrend. In the mid-term, the price is forming a flag (black lines) that can be considered a trend continuation pattern. The flag is formed above the neck line (red). The neck line is part of the bigger Head and Shoulders formation that is present on a EUR/USD daily chart. With every analysis, the price is putting more pressure on the neck line.
If the movement breaking out of the flag is strong enough, we shall expect an attack on this red support and a possible further breakout. This scenario is the worst that bulls can imagine, because a confirmation of the H&S formation will cause a general switch in the long-term trend and most traders will begin to sell.
On the other hand, as long as the price stays above the neck line and inside the flag, we can expect a minor rise on this pair. A major upswing can be expected once traders manage to break the 1.2990 resistance.
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