EURUSD forms Diamond Pattern; Suggests Bearish Reversal

The EURUSD has been consolidating in a diamond formation since a week ago after bouncing off the April bottom around 1.0602. Diamond pattern, when identified after an uptrend, suggests that prices tend to reverse to the downside. Since 8 March, the EURUSD has been on a broader downtrend and the rally since mid April could be a pullback within the broader downtrend. Currently, prices are capped below a historical resistance zone around the 1.072 zone, which adds confluence to our bearish outlook for the EURUSD.

In the event prices rebounds to the upper resistance of the diamond formation around 1.0718, it would offer a great entry point for a short position, with targets at the April low at 1.0602.