Forex Technical Update

Previous: EUR/USD Has Corrective Structure as it Trades Near Trendline Resistance (12/14)



The EUR/USD initially respected a declining resistance trendline in the 12/15 US trading session. However it could not verify downtrend as it had trouble staying below the 1.30 level. Instead the market stayed above, and even found it as support, extending the current corrective rally. The rally seems to be anchoring into a channel seen in the 1H chart, where the RSI reading broke above 60 reflecting loss of bearish momentum.

As the 12/16 US session gets underway, the EUR/USD is testing the resistance of this channel, along with the 23.6% retracement at 1.3087, and the 100 hour simple moving average. There is a minor pivot near 1.3050, and if the market can stay above this, there is a good chance the correction can extend toward the 38.2% retracement level at 1.3175. Note that this level is also pushing into a minor consolidation range, which means price action here can at least slow down if not reverse.

The next resistance is 1.3210 which was the low of the consolidation range EUR/USD was in the past few weeks. Reinforced by the 200H SMA, the 1.3210 area should provide key resistance. The overall market remains bearish here, has a chance for bearish continuation, and is close to where the bearish outlook could be invalidated. A break above 1.3250 would be a break above the 50% retracement and 200SMA. This weakens the case for the bearish continuation even though technically a 61.8% at 1.3318 is still considered within the context of a correction. This may be the last line of defense so to speak for the bearish market. Also if the market breaks above the 1.3210 area, it will have to break back below, maybe 1.32 to re-affirm the bearish stance.

Above 1.3318, we are looking at a short-term bullish market extending into the medium term and a return to the Dec. high near 1.3550 area can be considered he first target to the upside.

 Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources