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The Euro may have formed a “Bearish Head & Shoulders” pattern over the past 9-months with the neckline having a hard time holding as support at (1) in the chart above. At the same time the US$ is working on breaking a resistance line that has held the US$ in check for the past 8-years.
If the Power of the Pattern read is correct in the Euro and the neckline fails to hold as support, the Euro could quickly fall 5% in value, to the next support level around $1.20.
In the past a Euro decline/US$ rally was bad sign for stocks, this chart reflects that over the past two years, a higher US$ has meant higher stock prices!
How the Euro handles the neckline is super important to the future of risk assets!