BofA Sees “Head And Shoulders” Everywhere It Looks

zerohedge.com / by Tyler Durden / Feb 6, 2017 3:50 PM

In his latest slidepack, BofA’s chief technician Paul Ciana sees nothing but head & shoulder reversal patterns in virtually every currency pair and rate chart: i.e., the unwind of “Trump trade.” As he writes in a just released note, “many US dollar and euro crosses, US rates, US 2s10s and US 10y TIPS have just formed or are developing a head and shoulders reversal pattern. The breadth of these patterns suggests the January correction of the 4Q16 trends will continue in 1Q17, or at least delay a continuation of stronger USD and higher rates.”

This appears to be the chartist validation of the recently concluded Trumpflation trade, which is now being appreciated by technicians and other squiggle-drawers everywhere.

As Ciana further notes, FX crosses have broken more necklines, while US rates are still forming the right shoulders. These patterns are confirming bearish RSI divergences and TD Sequential signals.

First, looking at FX, BofA has spotted head and shoulders in USD and euro crosses. Bearish patterns have formed in US dollar indices such as the DXY and BBDXY. Crosses showing this technical reversal pattern include CCN+1M, USD/SGD, KWN+1M, EUR/RUB and EUR/NOK. Two crosses, EUR/USD and EUR/GBP, are still forming a right shoulder. Of note, Ciana says that unless the patterns are cancelled, he expects the DXY to slide to 97.86 and the EURUSD to rise as high as 1.108.

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