Forex Technical Update
The EUR/USD bounced off the 1.3077 support but failed to reach new highs yesterday, and instead slid during the 1/31 European - US session. The decline was sharp, and it broke the 1.3077 pivot as well as the rising channel, now testing the 1.3050 pivot. Note this was resistance for the Jan 23-25 consolidation, and also the 200 hour simple moving average. The bounce here is a good chance to test whether the dip is a start of a correction process against the broken channel seen more clearly in the 4H chart, or whether i has just completed an ABC correction.
The candles in the 4H chart suggests that this is a heavy correction, and the market could be heading lower, toward 1.30 (38.2% retracement), as well as 1.2928, 50% retracement. Some might argue there is even a head and shoulder, but this topping attempt is really a matter of perspective. it can be a head and shoulder or a zig zag. If we do get a bounce from say 1.30, and the rally fails to sustain a break above the neckline of 1.3077, it would be a head and shoulder, especially if the RSI falls below 40. A return back above 1.31, and a rise of the RSI above 60 without breaking 40 makes this an ABC correction.