EUR/USD (daily chart) spiked early in Friday’s trading session to hit a high of 1.3822 before consolidating its gains.
In doing so, the currency pair has closely approached the two-year high of 1.3892 that was established in late December.
The sharp advance also constitutes a rebound from its 50-day moving average after the pair dipped to a shallow low of 1.3642 on Thursday.
EUR/USD Daily Chart" title="EUR/USD Daily Chart" height="242" width="474">
The current rally occurs in the context of a general bullish trend that extends back to July’s low near 1.2750, and even further back to 2012’s 1.2040 low.
Price action on EUR/USD could be setting itself up for one of two scenarios
In the event that the currency pair continues its upside momentum next week with a breakout above the noted 1.3892 December high, the bullish bias and uptrend continuation will have been confirmed, with further upside resistance targets at 1.4000 and then potentially, 1.4250.
If price action fails to re-test December’s high, and turns sharply back to the downside, the pair could be setting itself up for a potential head-and-shoulders topping pattern – with the left shoulder in late October, the head in late December, and the right shoulder currently in the process of forming.
In the event of this potentially bearish scenario, initial downside price targets reside around 1.3500 and 1.3300.
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