Forex Technical Update

Previous: EUR/USD – Stalking a Declining Channel or Flag Correction (10/19)

EUR/USD 1H Chart 10/22/2012 7:20AM EDT

EUR/USD 10/22/2012 1H chart

Flag breakout: The EUR/USD is starting the week with a flag pattern breakout. The flag pattern was developed since last week’s high at 1.3139. After Friday’s (10/19) sell-off, it found support just above 1.30. As we approach the 10/22 US trading session, the break is extending toward a key pivot in the 1.3080-1.3085 area. A break above this area reflects bullish continuation attempt in the short-term.

Key trendlines: The flag breakout in EUR/USD introduces the bullish continuation outlook, but one that is held in the short-term, with focus on the 1.3139-1.3150 area because there is a very important declining trendline that there. It goes back to the 2011 high of 1.4940 established in May that year. Breaking above this area opens up 1.3480-1.35 area, near the 2012 high set in February.

If the market instead falls back below 1.30, it will be focused on a rising trendline that goes to the July and 2012 low at 1.2042. The break below this rising trendline would first open up the 1.28 pivot area. Below that, the 1.2042 level is exposed as well.

EUR/USD Weekly Chart 10/22/2012

EUR/USD 10/22/2012 weekly chart

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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