Technical Analysis

EUR/USD: Bank of America lays out the path for an inverted head-and-shoulders

Bank of America Global Research discusses EUR/USD technical outlook and looks for hints of and H&S top.

“A technical bottom pattern would go a long way in supporting the potential for further gains in the euro spot rate next year. One pattern to be on watch for is a head-and-shoulders bottom. If we assume the neckline of the pattern is 1.0350, then the left shoulder and head of the pattern have already formed. While below this, the right shoulder may begin to form,” BofA notes.

A dip near parity (the next few weeks) and then a rally above the proposed neckline at 1.0350/1.0375 would confirm a head-and-shoulders bottom. The bullish pattern measurements would imply a majority of the 2021-22 decline could be retraced, such as 1.0750, 1.0935/1.10 and possibly the 1.12s. The new highs in relative strength index (RSI) are a favorable condition for a bottom pattern to form,” BofA adds.

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