Forex Technical Update

Prev: EUR/USD's Head and Shoulder's Scenario Materializing (8/9)

EUR/USD 8/10/2011 1H Chart
- Looking at the 4H chart, EUR/USD formed an inverted head and shoulders pattern, but has yet to confirm it as a bottom.
- In early US session today, we are stuck below 1.44 (despite making a high at 1.4408).
- The 1.4280 is important, and is being cracked as I write this.
- Let's see if support can cause a pullback from the 1.4450-1.4480 area.
- Also, let's see if the RSI breaks below 40. This would pretty much invalidate the formation of a head and shoulder. However, we are still making higher highs and higher lows, so if the current decline stays above 1.42, we still have possible "nesting" to the upside. (Nesting is an Elliott Wave count terminology describing attempts to create motive waves that is more complex than the conventional 5-wave count).
- A break below 1.42 however eyes the 1.4054 August-low.
- The 4H chart shows the bullish anticipation.
- However, we see that the RSI is stuck below 60, and if the market is now falling back below 1.4280, 1.4250, we are stuck in consolidation with a slight possibility of upwards nesting if the market is still held above 1.42.
EUR/USD 8/10/2011 4H Chart

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Fan Yang CMT
Chief Technical Strategist