🔍 Pattern Insight: Inverse Head & Shoulders – A Powerful Reversal Formation
On the weekly timeframe, EURAUD has completed and broken out of a textbook Inverse Head & Shoulders (IHS) pattern — a highly regarded bullish reversal setup that often signals the end of a downtrend and the beginning of a sustainable uptrend.
Let’s break it down:
Left Shoulder: Formed in mid-2021 after a strong downtrend, price found support and rebounded, forming the initial shoulder low.
Head: A lower low was established around early 2022, marking the deepest point of the pattern. This represents the last dominant push by sellers before exhaustion.
Right Shoulder: In late 2022 to early 2023, bulls stepped in earlier than before, establishing a higher low — a strong sign of decreasing bearish momentum and accumulation.
Neckline: A descending resistance trendline connecting the peaks between the shoulders and the head. Once broken, it confirms the IHS breakout and trend reversal.
This multi-year formation reflects a major psychological shift: sellers lost control at the head, and buyers gradually regained dominance at the right shoulder, eventually breaking resistance.
📉 Retest in Progress – High Probability Entry Zone
Post-breakout, price action has pulled back for a technical retest of the neckline and curve line support — a dynamic trendline representing growing bullish momentum. This retest is essential for validating the breakout and building the base for a continuation rally.
The convergence of support zones (neckline + curve line) around the 1.70–1.72 area provides a strong confluence zone where buyers may step in again. This is often viewed as a second-chance entry for traders who missed the breakout.
🎯 Measured Target Projection & Resistance Levels
The IHS pattern gives us a clear measured move:
Measured Move Target: Distance from the head to neckline (~2,800+ pips) projected from the breakout point.
Target Zone: 1.92 – 1.95, just above the major resistance zone.
Resistance Zone: 1.85 – 1.87 is a historically significant supply area and may act as interim resistance.
Break and close above the resistance zone would further validate the bullish trajectory and open the door for higher targets.
📌 Risk Management – Defined Parameters
To manage risk effectively, consider:
Stop Loss: Below the recent retest low and curve line support, ideally placed at 1.63848, protecting against a false breakout.
Entry Idea: If bullish confirmation (e.g., bullish engulfing candle, higher low on lower timeframe) appears at retest zone, initiate a long position.
Risk-to-Reward (RR): Targeting 1.92 from an entry around 1.72 offers a 4:1 RR or better — highly attractive for swing and position traders.
🧠 Psychological and Structural Significance
This pattern is not just technical — it represents behavioral change in the market:
The head shows capitulation — a final wave of bearish pressure.
The right shoulder indicates growing confidence in bulls and waning selling interest.
The neckline breakout is where sentiment flips — traders recognize the change and enter long positions, fueling the breakout.
The current retest phase is crucial. Many professional traders wait for this moment to confirm that support holds before fully committing.
🔎 Final Thoughts & Strategy
Trend has shifted bullish on the weekly chart after years of consolidation and decline.
We’re seeing a classic breakout–retest–continuation setup.
A breakout above 1.85 would likely trigger momentum traders and institutions, driving price swiftly toward the 1.92–1.95 range.
Invalidation: Break below 1.63848 would invalidate the pattern and shift sentiment back to neutral or bearish.
📈 Trade Plan Summary:
Pattern: Inverse Head & Shoulders (weekly)
Bias: Bullish
Entry Zone: 1.70 – 1.73 (retest area)
Target: 1.92+
Stop Loss: Below 1.63848
Risk Level: Medium (weekly setup, but long-term play)
On the weekly timeframe, EURAUD has completed and broken out of a textbook Inverse Head & Shoulders (IHS) pattern — a highly regarded bullish reversal setup that often signals the end of a downtrend and the beginning of a sustainable uptrend.
Let’s break it down:
Left Shoulder: Formed in mid-2021 after a strong downtrend, price found support and rebounded, forming the initial shoulder low.
Head: A lower low was established around early 2022, marking the deepest point of the pattern. This represents the last dominant push by sellers before exhaustion.
Right Shoulder: In late 2022 to early 2023, bulls stepped in earlier than before, establishing a higher low — a strong sign of decreasing bearish momentum and accumulation.
Neckline: A descending resistance trendline connecting the peaks between the shoulders and the head. Once broken, it confirms the IHS breakout and trend reversal.
This multi-year formation reflects a major psychological shift: sellers lost control at the head, and buyers gradually regained dominance at the right shoulder, eventually breaking resistance.
📉 Retest in Progress – High Probability Entry Zone
Post-breakout, price action has pulled back for a technical retest of the neckline and curve line support — a dynamic trendline representing growing bullish momentum. This retest is essential for validating the breakout and building the base for a continuation rally.
The convergence of support zones (neckline + curve line) around the 1.70–1.72 area provides a strong confluence zone where buyers may step in again. This is often viewed as a second-chance entry for traders who missed the breakout.
🎯 Measured Target Projection & Resistance Levels
The IHS pattern gives us a clear measured move:
Measured Move Target: Distance from the head to neckline (~2,800+ pips) projected from the breakout point.
Target Zone: 1.92 – 1.95, just above the major resistance zone.
Resistance Zone: 1.85 – 1.87 is a historically significant supply area and may act as interim resistance.
Break and close above the resistance zone would further validate the bullish trajectory and open the door for higher targets.
📌 Risk Management – Defined Parameters
To manage risk effectively, consider:
Stop Loss: Below the recent retest low and curve line support, ideally placed at 1.63848, protecting against a false breakout.
Entry Idea: If bullish confirmation (e.g., bullish engulfing candle, higher low on lower timeframe) appears at retest zone, initiate a long position.
Risk-to-Reward (RR): Targeting 1.92 from an entry around 1.72 offers a 4:1 RR or better — highly attractive for swing and position traders.
🧠 Psychological and Structural Significance
This pattern is not just technical — it represents behavioral change in the market:
The head shows capitulation — a final wave of bearish pressure.
The right shoulder indicates growing confidence in bulls and waning selling interest.
The neckline breakout is where sentiment flips — traders recognize the change and enter long positions, fueling the breakout.
The current retest phase is crucial. Many professional traders wait for this moment to confirm that support holds before fully committing.
🔎 Final Thoughts & Strategy
Trend has shifted bullish on the weekly chart after years of consolidation and decline.
We’re seeing a classic breakout–retest–continuation setup.
A breakout above 1.85 would likely trigger momentum traders and institutions, driving price swiftly toward the 1.92–1.95 range.
Invalidation: Break below 1.63848 would invalidate the pattern and shift sentiment back to neutral or bearish.
📈 Trade Plan Summary:
Pattern: Inverse Head & Shoulders (weekly)
Bias: Bullish
Entry Zone: 1.70 – 1.73 (retest area)
Target: 1.92+
Stop Loss: Below 1.63848
Risk Level: Medium (weekly setup, but long-term play)
For Daily Trade Setups and Forecast: 📈 t.me/xauusdoptimizer
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
For Daily Trade Setups and Forecast: 📈 t.me/xauusdoptimizer
Premium Signals Fr33: 💯 t.me/xauusdoptimizer
🥰🥳🤩
Premium Signals Fr33: 💯 t.me/xauusdoptimizer
🥰🥳🤩
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.