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While there are many reasons to be bearish on the euro and the European economies, the technical lines may be pointing to a move higher in EUR/USD.

The team at Nomura highlight the Head & Shoulders pattern. For USD/JPY, the vertical ride may also be about to change.

Here is their view, courtesy of eFXnews:

The base building process on EUR/USD hourly chart is supportive for the technical outlook suggesting that a rally could be gaining traction in the near-term, notes Nomura Techs.

“There is a neckline developing at 1.2578 that can resolve a head & shoulders bottom; once this right shoulder completes, the projection target off this base is 1.2798,” Nomura projects.

“S/t, critical support for this basing call is 1.2399 as this would negate either of the 2 bullish Elliott counts that we favor,” Nomura argues.

“This wave-2 pullback could take some more time as the right shoulder forms so we’ll wait for a trigger/signal via a rally through neckline resistance at 1.2578. Key range going forward is 1.2578/2399,” Nomura adds.

EURUSD Head and Shoulders November 2014 Nomura euro dollar to rally

In USD/JPY, nomura thinks that  because the trend is still clearly up, we’ll need to see a reversal pattern or 5-wave decline (on the hourly chart) to confirm that the impulse from 105 to 117 is complete.

“We need to see a 5 wave down, 3 wave up series to signal that a reversal is underway. Near-term, the first price signal that a top might be forming is 115 where the latest pivot and channel support align. Then 113.86 is the next key support,” Nomura clarifies.  

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