Last week, the EUR/USD pair looked oversold before the bullish engulfing daily candlestick emerged off price level of 1.2500.
The origin of the next bullish engulfing pattern (around 1.2600) previously provided a good BUY position as suggested in previous articles.
The upper limit of the movement channel (1.2880-1.2900) was being targeted this week. However, bearish pressure was applied earlier around 1.2800-1.2840.
This allowed a bearish breakout off the current bullish channel to take place. This probably confirms a Flag continuation pattern. Initial daily target level would be located around 1.2490.
A valid BUY position was previously suggested around the neckline of the bullish Head and Shoulders pattern (price level of 1.2660).
On Wednesday, the market expressed quite strong bearish momentum that pushed below the lower limit of the previous bullish channel.
The bears have successfully pushed towards price zone of 1.2600-1.2620 ( projection target of the double-top pattern and the lower limit of the newly established channel ).
As anticipated, around this price zone, bullish recovery was expressed before the pair could actually test the lower limit.
Recommendation:
A valid SELL entry may be anticipated around 1.2730 at retesting which should be reached today. Stop Loss should be set at 1.2780.
Price level of 1.2730 corresponds to the upper limit of the newly established channel depicted on the chart.