Forex Technical Update
After the false break to the upside on 12/2, and a slide after the Non-Farm Payroll, the EUR/USD fell to 1.3360 before finding support. A pullback of 50% has so far materialized. A break back above 1.3477 (61.8% retracement), would be a bad look for the bearish outlook. Note that the 1H RSI has not been able to tag 30, showing a weak bearish attempt. If it is able to bounce off the 1.3425 pivot in the US session to break above 1.3477, we should consider the possibility of further upside in the EUR/USD.
The 200 hour simple moving average acted as support after the 12/2 NFP release. If it is broken, we can return to the bearish outlook again. When the market consolidates the RSI tends to get stuck between 40 and 60. So a break out of this RSI range will also give clue to which direction the market is going for further upside consolidation, or a attempt to continue the bearish mode.
The 4H chart shows that the RSI is still held mostly below 60, so there is that bearish stance even though we anchored out of a declining channel/wedge last week. So as you can see, the EUR/USD is at the crossroad. To the upside, there is containment near 1.3540, and the 1.36. Only a break above 1.3650 should put away the bearish outlook for the medium term, for the rest of this month/year. The downside sees a rising support near 1.3320, and then last week's low at about 1.32-1.3210, before opening up targets to further downside.
What makes it even more so is that we have a couple of important fundamental themes for the Euro. The ECB decides on interest rate policy Dec 8th. There is also an EU summit on Dec 9th, that will continue to tackle the Eurozone debt crisis and produce headlines the market will monitor.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources