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Technical Update - EURNOK Reversal pattern unfolding. EURSEK correction looming
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: EURNOK Shoulder-Head-Shoulder reversal pattern confirmed indicating lower levels with potential to 10.80
EURSEK running out of steam short of the 12.00 level. Now testing rising trendline. Indications of a larger correction
EURNOK has closed below key support at around 11.40 thereby confirming the Shoulder-Head-Shoulder pattern. EURNOK is currently testing the Neckline. Normally it would be a break of the Neckline that would confirm a SHS pattern but since the Neckline is declining we use the valley between the Head and the right Shoulder.
RSI is below 40 threshold confirming the downtrend. A down trend with potential to around 10.80 as indicated by the two vertical arrows. (You measure the Head to Neckline distance and subtract it from the break out price. That gives a potential down to around 10.80
We can also apply Fibonacci extension to determine potential SHS target prices. 0.618 Extension just above 11.00 sits around the 200 daily Moving Average. 0.618 Fibonacci ratio is often the most “hit2 ratio of them all.
However, there is strong support at 11.20 where a bounce should be expected.
To demolish the SHS pattern a close above 11.80.
EURSEK ran out of steam just short of the 12.00 level. A correction seems to unfold currently testing rising trendline.
A break below the trendline could see EURSEK testing support at around 11.67 and the 0.382 retracement.
A close below could lead to further selling down to the 0.618 retracement at 11.46.
IF EURSEK bounces from the trendline to resume uptrend previous peak is likely to be taken out and EURSEK taking out 12.00
RSI divergence indicates the uptrend has been weakening for some time and a correction is likely
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