(Click on image to enlarge)
The weekly chart for the EUR/USD is another that is now developing an interesting pattern and moving to test a key level of support that could ultimately define the longer term trend of this pair. Starting with the pattern itself, over the year the price action has built into a head and shoulders, albeit with a somewhat lop sided shoulder to the right, which failed to rally as far as its partner to the left. Nevertheless, the head is self evident above, and where the pair repeatedly tested the 1.2400 region as shown on the accumulation and distribution indicator and the dashed line.
The key level below is the one now being tested in early trading, and which was also tested last week, and this is the heavy blue dotted line at 1.1600. Throughout May, June and July this level has been approached, but on each occasion held firm resulting in a subsequent rally higher and back to test the equally strong level of resistance shown with the red dashed line at 1.1880. Both these levels are equally strong as evidenced by the thickness of the lines on the indicator and reflecting the number of times each has been tested. Now with the pair trading at 1.1558 in the London session this is likely to be a key level, and should this be breached with sustained volume and confirming price action, then the pair is likely to move firmly lower with the next level of potential support awaiting in the 1.1300 area in the longer term.