Forex Technical Update
Although the EUR/USD showed strength in the early 1/24 US session, the RSI in the 1H chart was not able to come back above 60 and price was unable to push above the previous high near 1.3060. This showed a lack of follow-through in the bullish intent. In the 1/25 European session, the market started falling sharply as reflected by the size of the bearish candles relative to the previous bullish candles. This brought price below 1.2950, breaking below a rising support and basically forming a double top. (It may be interesting to note that both tops were minor double tops themselves). Furthermore, the RSI did dip below 40 and is kissing 30, showing lost of bullish momentum, and establishment of bearish momentum.
There are a couple of important pivots to show resistance if there is a pullback in order to confirm the breakdown. First, if 1.2950 becomes resistance, it will be clear that bears are in charge. But even if the market pulls back further, we should see if 1.2990-1.30 area holds. If it does, the bearish outlook is still valid in the short-term. The first target is the 1.2880 pivot area, lows of this week. Below that there could be support in 50-61.8% retracement area. Then if the market does not return to the bullish mode, we could be in a bearish continuation of the medium term. A break below 1.2790-1.28 opens up the 1.2623 low. The RSI in the 4H chart should confirm with a sustained break below 40, or the momentum can still remain bullish.
Fan Yang CMT is the Chief Technical Strategist of IBTRADE and FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.