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EUR/USD.: Head And Shoulders. Data for: 04/08/05 at 18:30 Monaco cet Monte Carlo (TradingLimit) - - - Non Stop Rolling 24 hour chart levels: Resistance : 1.2421/1.2564/1.2646/1.2689 PIVOT : 1.1898 Support : 1.2265/1.2155/1.1953 The Move: Early Wednesday the EUR/USD cross broke through its $1.2257 resistance area, which has capped the market since mid-June, and then advanced above its $1.2295 mid-June high. Since then it has traded well above that, reaching a new two-month high at $1.2389. Together with the inverse head and shoulders pattern that has now been formed, this is technically bullish and means the recent consolidation period has now almost certainly ended. The euro's advance should thus continue in the weeks ahead with a medium-term base now having formed. The current bounce should continue in the weeks ahead, now that the 50-day moving average has been breached at $1.2143 this week and an inverse head and shoulders pattern has been formed these past few months. Looking at a daily chart, one can see the inverse head being the July $1.1865 low, the left shoulder the June 17 $1.2295 high and the right shoulder the $1.2257 July 21 high. The neckline is the line drawn from the left shoulder to the right shoulder and came in at $1.2243 on Thursday morning. This was clearly breached Wednesday and gives technical analysts a possibility to work out an upside target for the currency pair. It can be found by taking the distance from the neckline to the head (0.0411) and projecting it upward from where the break of the neckline occurred at $1.2243 on Wednesday. This gives a technical target at $1.2654, not far above the 38.2% Fibonacci retracement of the December 2004 to July decline at $125.49, which will be targeted once $1.2492 minor resistance has been breached. More often than not, once a break above the neckline has taken place a retest of the neckline occurs before a market moves on. It would thus come as no surprise if another retest of the $1.2257 support zone and the $1.2240 area were to take place in the days ahead before the advance toward $1.2492 and higher really gets under way. Any short-term retracement lower from the current $1.2312 level at 0900 GMT thus represents a euro buying opportunity. Only a decline through the July 27 low at $1.1962 would void this column's bullish forecast.