Forex Technical Update

The USD started the week strong across the board against the majors (except against the JPY). The EUR/USD the GBP/USD fell sharply to start the 5/7 session, but eventually pared losses throughout the latter part of the session. The 5/8 Asian session however did not follow through with the correction, and the market put back USD-strength through the European session into the US session.

Now, these pairs are trying to break Monday's lows, which would signal bearish continuation. However, a failure to break lower in the US session will suggest further consolidation throughout this week;

EUR/USD1H Chart 9:55AM EDT 5/8: Previous: 5/7

EUR/USD

The EUR/USD 1H chart shows a bearish market that maintained the bearish momentum as the RSI reading failed to break above 60, and price action failed to break back above the 1.31 handle. It is now edging lower, at 1.30 again, trying to retest the 1.2950 Monday low. If the RSI falls below 30 again, the bearish momentum will be revived, and a break below 1.2950 would be imminent. The next support level for the EUR/USD is near 1.2870.

GBP/USD 1H chart 10:00AM EDT 5/8/2012. Previous: 5/7

GBP/USD

After failing to break through 1.62, the GBP/USD fell back and is nearing the Monday low around 1.6120. Then the 1.61 psychological barrier might cause a reaction, but key support is not until the 1.6050-1.6070 area. The bearish outlook is limited to 1.60, which would meet a rising trendline. Until 1.60 is broken, GBP/USD looks poised to continue higher, although there is a challenge of a recent trendline will be slightly below 1.63 if the market does indeed head higher in May.

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Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist of FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.