EURUSD - Major Bullish weekly pattern or part of downtrend?

The EURUSD continues to show strength consistent with a potential set-up that I have been highlighting  in recent posts, which has the potential to see EURUSD move higher towards the high 1.4000s. However it has a number of hurdles to overcome along the way, including the resistance which has defined the downtrend pretty much since the top in 2008. This resistance is represented by a line which connects Weekly closing highs through 2008 and 2009 and acted as resistance in late 2010. Over the next couple of weeks this line comes in at 1.4040/1.4055, it will be very interesting to see how price acts at these levels, if it does get there.

In the much bigger picture a clear and sustained break over the 1.4040/50 area would favour strongly a move towards much higher levels in the bigger picture and will support a shorter-term move towards the high 1.4000s. The next chart shows a large Bull-Flag pattern which supports this argument. The other option, is that since 2008 we have been in a downward trend, and that this move back towards 1.4000 is just a rally within the on-going downtrend, with the low 1.40s acting as resistance before this trend re-asserts itself.

One argument which leads me to favour the upside, is the rejection of the breakdown of a 'Head and Shoulder' pattern early last year. Often (but not always) failed Head and Shoulders pattern come back to eventually re-test the high of the pattern.

The chart below shows the much bigger picture. The line emphasised on the above chart is shown as the upper line on the Huge Bull Flag pattern.

There is every chance that the next few weeks will lead to some sort of Bullish or Bearish conclusion.