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EUR/USD Daily Chart 11/5/2012 7:15AM EDT

EUR/USD 11/5/2012 daily chart

Consolidation: The EUR/USD has been in consolidation since September, when it found resistance at 1.3170. Since then, we have basically completed an ABC correction as we begin this week of trading (11/5). Although recent price action has been bearish in the last couple of weeks, the picture in the daily chart is still within the context of consolidation. Note the RSI reading is at 40. A break below 40 will be needed to reflect a loss of bullish or consolidation momentum. Although the 1.28 psychological and previous support pivot is broken, there is a last line of defense at 1.2745.

Breakdown: A break below 1.2745, with the daily RSI below 40 for me would signal a break down of the consolidation, and expose the 2012-low near 1.2042. The 50% retracement target is at 1.2617, and the 61.8% is at 1.2487. There is also a pivot area around 1.2450.

Throwback: The 4H chart shows a EUR/USD that is developing bearish momentum as the RSI tags 30 but holds under 60. It is under 30 again, which is a good sign for overall bearish momentum, but might be a sign of oversold condition in the near-term for the 11/5 US session. A hold of the RSI under 60, preferably under 50 will confirm the bearish breakout scenario. However, a throwback above 1.2880 with the RSI above 60 makes the bearish outlook unclear. A break back above 1.30 definitely shelves the bearish outlook, and refocuses on the resistance part of the consolidation noted on the daily chart.

EUR/USD 4H Chart 11/5/2012 7:20AM EDT

EUR/USD 11/5/2012 4H chart

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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