The EURUSD launched a sharp rally over the past few sessions and formed a very narrow rising wedge formation as visible on this H4 chart. The latest candlestick pattern formed a spinning top formation at resistance from the rising wedge formation and indicates a change in trend is imminent. Expect a rather violent break-down of price action which could lead to a 400 pip correction.
MACD has weakened drastically and has not confirmed the most recent leg up while it flirts with a break-down from bullish momentum to bearish momentum which will coincide with the upcoming crash. RSI has reached overbought levels and formed a negative divergence which points to another change in trend as soon as next week.
I recommend taking initial short positions around 1.2600 and look for potential additions to those shorts above 1.2670 as well as 1.2720. Place your take profit levels below 1.2425 or ride it down to 1.2340 if you have a longer time horizon.
