EUR/USD Holding near 1.28, Challenged by the 2012 Declining Trendline

EUR/USD Daily Chart 9/10/2012 7:00AM EDT

Rally since July: The EUR/USD has been in a bullish mode since the 1.2042 low from July 24. The euro has been in a reprieve and the US dollar has been losing ground due to increasing speculation of the FOMC to implement QE3. Even before the NFP last Friday (9/7), the market already pushed through the key resistance pivot near 1.2750. As we begin a new week, the EUR/USD is challenged by some resistance factors.

1) As the daily chart show, the RSI just tagged 70, a sign of near-term overbought condition, but also a sign of nascent bullish momentum in this time-frame. 2) Another factor is the 200-Day SMA, a common moving moving average. 3) The moving average has more significance as it is coincident with a rising channel resistance, though this projected channel resistance appears to have been cracked already. 4) The most important technical factor is probably the declining trendline going back to the 2012-highs near 1.3485.

Clearing above the current 1.2815 high, and the declining trendline would be a very step in extending the bullish trend. The FOMC meeting this Thursday is going to be a key to whether the market can do this. However, if the market is going to "get ahead of itself" and continue to price in QE3, the next key resistance is in the 1.2970-1.30 area, which will be a consolidation support area for price action from beginning of 2012 to May, when the market broken through.

If you watch fibonacci retracements, 61.8% of the 2012 bear run is at 1.2934.

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

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