Forex Technical Update
The 1H EUR/USD chart shows a market anchoring out of a declining channel. This suggests it is ready for a correction. So far, the correction has developed 1 leg up rejected at 1.2780. This move also pushed the RSI reading to 60, where it fell back, reflecting maintenance of the bearish momentum. There is actually a negative reversal signal right now*, pointing with a swing projection toward 1.2640. A close below 1.2720 will be needed to open up this outlook to 1.2640 and 1.26 for this current trading week. If the RSI falls below 40, we can be already done with the correction, and onto bearish continuation, with 1.26 as the next level to monitor for support.
*A Negative reversal occurs when the RSI high is higher, but price high is lower. During a downtrend, this suggests further bearish momentum.
Otherwise, we still have some further bullish outlook in the short-term in the context of a correction. The next resistance is at 1.2822, 38.2% retracement. If the market stops here, we may be developing a more flat correction, going sideways for a week of two. Otherwise, if the EUR/USD extends beyond 1.2822, it might have more of a zig zag structure, which opens up 1.2870 (50% retracement), and then 1.29-1.2920 (200hour simple moving average, 61.8% retracment) area. Really, the market should stay below 1.29, for a return to the bearish scenario toward 1.26 and possibly lower.
The weekly chart shows the support lower, at 1.25-1.2518 (78.6% retracement), but more significantly, there is a pivot at 1.2460, (to the left of this chart), which represents support for June, July, and August of 2006.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources