Bad omen chart with break below trendline, Double Top

• EUR/USD broke a key trendline and could have formed a bearish pattern.
• A Double Top reversal pattern could be a bad sign for the pair.

EUR/USD dips below trendline for June rally. On Tuesday, it executed a reversal move to “kiss the trendline goodbye” and now appears to be falling again.

The overall tenor of the chart suggests a short-term bearish outlook. Momentum as measured by moving average convergence divergence (MACD) is in negative territory. If prices can close below Friday’s low of 1.0951, the break will be confirmed and a deeper decline is likely.

EUR/USD daily chart

A confirmed break of the trendline would likely lead to a deeper selloff. Such a move could initially reach a target of 1.0865 (the 61.8% Fibonacci (Fib) extrapolation of the move before the trendline break). The 200-day simple moving average (SMA), however, could come in with support just before then at 1.0875, suggesting another more conservative option.

Adding to the bearish picture is the possible Double Top price pattern that could have formed in September. This is the “M” shaped pattern formed just below the heavy resistance line at 1.1226. Double Tops are signals that the uptrend has come to an end and the price is reversing. The “neck” of the pattern at 1.1001 has already been broken, confirming the activation of the bearish target of the pattern at 1.0858, the 61.8% Fib extrapolation of the lower pattern high.