The euro-dollar rally has continued in recent weeks, hitting a peak of 1.14 last week. While the breakout initially looked like a short-term move rather than a trend change, the situation now is different and that impacts on long term positions.
The fast and decisive breakout above the historical resistance level near 1.10 has encountered short term resistance near 1.14. This has the potential to develop a inverted head and shoulder trend reversal pattern. The pattern is completed with a small retreat from short term resistance near 1.14 followed by a rally that moves above 1.14 and tests resistance near 1.16. In this case it's the confirmation of the inverted head and shoulder pattern that is more significant than the historical resistance near 1.16.
Confirmation of an inverted head and shoulder pattern sets an upside breakout target near 1.22. This is well above the value of the downtrend line. This confirms a new uptrend rather than just a rally and retreat pattern.