Forex Technical Update
Previous: EUR/USD - Friday Sell-off ? (8/24)
EUR/USD 1H Chart 8/28/2012 7:15AM EDT
After Friday's (8/24) sell-off, the EUR/USD extended the corrective decline on Monday (8/27) trading. Looking at the 1H chart, we see 2 swings down, or 3 waves down. The downswings are also in abc structures, making this a "double 3″ in Elliott Wave terms, but really just a bigger ABC correction.
During the 8/28 Asian-European session, the market found support at 1.2465 and rallied above a projected resistance trendline holding the ABC correction. As we gear up for the US session, the EUR/USD sits at the 1.2560 handle, a near-term resistance pivot (end of wave B).
This price action does signal a bullish continuation, with focus in the US session being the 1.2589 high and 1.26 handle. Above that, the upside targets remain the resistance pivots set in June at 1.2685/90, and 1.2750/55.
Further Double 3 Scenario:
We observed a double 3, but really this ABC correction so far can be a part of a bigger double 3, or bigger ABC correction, making this just the (A) wave of that larger structure. Bernanke's testimony on Friday will be a highly anticipated event risk. If you believe this will cause the market to gyrate, then this Double 3 scenario is probably appropriate, while the bullish continuation scenario might be a bit premature.
The 4H chart shows that momentum in the short to medium term (since late July) has not been lost as the RSI remains above 40, and if it does push back above 60, it is a reflection of the bullish continuation momentum. However, this extra double 3 scenario would bring the EUR/USD to focus on the 1.2440 pivot and rising trendline. For me, only a break below that trendline seen in the 4H chart is a sign of bearish outlook.
EUR/USD 4H Chart 8/28/2012 7:25AM EDT
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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