Forex Technical Update
The 1H EUR/USD Chart shows a gap to the downside to start the week. This bearish action is important as it break below the 1.3770 pivot as well as a rising channel support. It has pushed below 1.37 psych support in the European session as well. This is known as a counter-trend breakout, because last week's rally was counter to the bearish trend the EUR/USD has been in for the 2 weeks before that. Before the discussion of further bearish continuation, it should be noted that opening gaps tend to be closed, and it would be prudent to anticipate a similar action to the EUR/USD. A pullback towards 1.3770 can close the gap as well as confirm the bearish break if this rally attempt slows and tops off near 1.3770. Then a slide back below 1.37 confirms bearish domination.
The 4H EUR/USD chart shows a swing projection taking roughly the high 2 week's ago to the low a week ago, and swinging it from the high last week. This projection targets 1.3250, pending a break below the 1.3494 low. Note that 1.3250 is also near the 161.8% extended retracement of last week's correction rally. This scenario is also strengthened by a negative reversal signal in the 4H chart, where the RSI high is higher, but the corresponding price high is lower. During a downtrend, this suggests bearish continuation. As the Eurozone crisis drags on, the EUR continues to be pressured, and the safe haven currencies like the JPY and USD continue to strengthen.
Subscribe and become a member to share your views and join live discussions as well as webinars about the markets.
Fan Yang CMT
Chief Technical Strategist