Two weeks ago, the EUR/USD pair looked oversold before the bullish engulfing daily candlestick emerged off price level of 1.2500 one month ago.
The upper limit of the movement channel (1.2880-1.2900) was targeted. However, bearish pressure was applied earlier around 1.2800-1.2840.
A bearish breakout off the bullish channel took place shortly after. Thus, confirming a Flag continuation pattern. Initial daily target level was located around 1.2490.
Since no fixation above 1.2760-1.2780 took place on a daily basis, the EUR/USD pair remained under bearish pressure.
Now we can see another possible continuation pattern. A Head and Shoulders pattern to be watched on daily basis. Obvious daily closure below 1.2490 ( the origin of the previous bullish swing expressed one month ago ) can theoretically extend the bearish targets towards price level of 1.2200.
Last week on Wednesday, the market expressed quite strong bearish momentum that pushed below the lower limit of the previous bullish channel.
As depicted on the chart, the EUR/USD pair has respected the limits of the current bearish channel.
As anticipated, Price levels around 1.2750 ( upper limit of the channel ) provided a valid SELL entry. Quick decline took place towards price level of 1.2500 where the lower limit and the origin of the recent bullish swing is located.
Recommendation:
The SELL entry anticipated around 1.2730-1.2760 is running in profits now. Stop Loss can be lowered to 1.2640 and partial exit can be considered to secure some of the achieved profits.
Daily closure below 1.2500 can give another SELL signal for risky traders. Stop Loss to be set as daily closure again above the entry levels with target levels located at 1.2440 then 1.2370.