Forex Technical Update

Previous: EUR/USD Maintains Bullish Momentum While Consolidating (9/11)

Germany's court ruling from the 9/12 European session: (extract)

EUR/USD Daily Chart 9/12/2012 7:00AM EDT


As the EUR/USD is accelerating after breaking above the 1.2750 June high. The rally in the euro against the US dollar is on the back of both QE3 expectation for the Fed, which pressures the US Dollar, and hope surrounding the bailout plans in the eurozone, which lifts demand for the euro.

EUR/USD is pushing towards very key levels around 1.30. The 1.30 handle is a psychological resistance, and the 1.2970-1.30 area was support for a consolidation period from February to May this year. As the market becomes a bit overbought in the short-term, the pair should find resistance here ahead of the FOMC policy meeting Thursday (9/13) 2:00PM EDT (18:00GMT).

However if even 1.30 breaks, we look to a major trendline for the next factor of resistance. In the weekly chart, you can see a declining trendling going back to the heights of 1.4940 from May of 2011. There is also a resistance pivot in the 1.3250-1.3270 area, where price might meet this declining trendline. A break above this key trendline definitely needs QE3 combined with successful containment of the eurozone crisis.

EUR/USD Weekly Chart 9/12/2012 6:55AM EDT


Signals for reversal: At this point, only a return below 1.2750 should introduce the idea that the market is not bullish. In the 4H chart, where bullish momentum has been very persistent, a break of the RSI reading below 40 can suggest loss of this bullish momentum. This is far from a signal of reversal, but could be one of regression back toward the 1.25 handle, or the rising trendline that's been intact since late July. A break below that should introduce the bearish outlook outside of the short-term.

EUR/USD 4H Chart 9/12/2012 7:10AM 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.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.