This Great Graphic, made on Bloomberg, shows a very positive technical development that has taken place on the week bar charts. We mention this possibility in our weekly technical note (here), but given this recent price action, it was worth showing it graphically.
What you are looking at here is a possible head and shoulders bottoming pattern on a weekly chart, which has greater gravitas than a daily or hourly pattern. We drew in the neckline (in white). It is downwardly sloping which is ideal for a bottom pattern.
The importance of the chart pattern is the price projection it provides. The roughly twelve cent pattern would signal a move of a similar magnitude from the breakout. This suggest a move toward $1.42.
As is often the case, after the initial break, the euro came back to test the neckline again and it largely held. Some practicing the art of technical analysis would not draw the white line, but would place more emphasis on where we drew the read line, near $1.35, which corresponds to last year's high and a 50.% retracement of the sell off since the $1.50 peak in May 2011. The next retracement objective comes in near $1.3830.