Forex Technical Update
The EUR/USD is in a correction after initially extending the bull run started at the beginning of the previous week. Over the 1/24 Asian-European session, the market formed a double top, and in the following US session, the market started with a completion of the double top and a follow-through to the downside. The 1H chart above shows the market trading just above the 61.8% retracement level of 1.2946. This 1.2940-1.2950 area is also a previous pivot on Jan 20. Coincidentally, the EUR/USD is also trading at a rising trendline shown in the 4H chart. Meanwhile the 1H RSI readign is at 40, which should act as support if the market is to maintain the bullish momentum.
A break below 1.2940 and an RSI reading below 40 can significant a more significant bearish correction to the rally started last week. The 4H chart shows that the next support pivot after breaking below 1.2940 is near 1.2880. And if that breaks, the last line of defense is at 1.2790 (61.8% retracement). The RSI does show a bearish divergence to suggest this, so if it follows through, the test of 40 will be important. A break below that, opens up the lows from last week at 1.2623.
On the otherhand, if the market respects 1.2940, the 4H EUR/USD chart would show a slingshot, where the market breaks above the 200 4H SMA, and then tests it as support before confirming the bullish outlook. In this scenario, the 1.3062 high is the first target, then 1.3080, and then 1.32 as mentioned in our last EUR/USD technical update.