Recently few Head & Shoulders formations appeared on currency pair charts. On EURUSD one has already ended (described here), after crossing the neck line the dips reached 400p, according to the theory that the expected dips can reach the height of the formation measured from the top (head) to the neck line. Currently, the second smaller one is in progress… as you can see in the attached picture.

EURUSD H1 – the Head and Shoulders formation in action…;)

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Meanwhile, the USDJPY is preparing another opportunity to take a good position. This is best seen in the H4 chart.

USDJPY H4 – will Head and Shoulders appear here too and lead to the yen strengthening?

Here the left arm and head are already formed, we are currently observing the pair growing after rebounding from the hypothetical neck line. The fate of the formation can be determined by a strong S/R 109.60, which can stop the growths and direct the quotations southwards. However, if the level is overcome, the probability of falls and the formation of an H&S will decrease significantly.

USDJPY H1 – A sequence of higher highs(HH) and higher lows (HL) indicates an upward trend. Only when the trend line is broken can it direct the quotes south and establish the right arm of the H&S formation

It seems that whether the RGR will become complete and the right arm will be completed will be determined by breaking the trend line (chart H1) according to which the price moves so far. This will negate a sequence of higher highs and lows which may result in a local downward trend.

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