The recent bearish slide below 1.2870 invalidated the previous attempt of bullish reversal. Thus, bearish decline towards 1.2680 and 1.2570 took place shortly after achieving the projection targets of the recent flag pattern.
Last week, the EUR/USD pair looked oversold and was trading beyond the lower limit of the channel before bullish momentum could get it back inside the channel. That's why, price action around 1.2560 is again essential to determine the next destination.
Recently, Bullish recovery was expressed off 1.2500 to push towards 1.2650 and 1.2700 ( back inside the breached channel ). Thus, a bullish engulfing pattern is depicted on the chart.
Sideway consolidation is still taking place. The origin of the bullish engulfing pattern (around 1.2600) is being approached. A good BUY position can be taken ( review 4H chart below).
The current medium-term bearish trend remains intact as long as the bears keep defending the price zone around 1.2870 (the recent consolidation zone).
A short-term bullish Head and Shoulders pattern was established on the 4H chart as anticipated. 4H fixation above 1.2700 is essential to confirm the reversal ( yet the bulls are failing so far ).
Another bearish pullback is taking place towards the origin of the bullish Head and Shoulders pattern. A good BUY position can be taken.
However, 4H fixation outside the current depicted channel (below 1.2610) threatens the bullish scenario, giving rise to the bears to push towards 1.2560 and 1.2500.
Recommendation :
The neckline of the confirmed Head and Shoulders pattern on the 4H chart is being retested today. A valid BUY entry is suggested today. Stop loss should be set as daily closure below 1.2540.
Projection target levels to be visited should be located around 1.2800 and 1.2870 where the upper limit of the channel and significant Fibonacci level are located.
Then price action should be watched again around 1.2870 ( upper limit of the channel and previous broken demand level ) for another long-term SELL position.