Forex Technical Update

Prev: EUR/USD Holds below 1.44 and Forms a Double Top (8/10)

EUR/USD 8/11/2011 1H Chart
- The EUR/USD has been ranging in the medium term. Yesterday's price action was bearish after a failed inverted head and shoulder attempt.
- Today, as we get deeper into the European session, the market shows another failed bullish attempt.
- Failure to break above the 1.4280 pivot, respect of the 50% retracement level which is near 1.4260, and the 200SMA wich was at about 1.4250.
- A very strong bearish hourly candle followed. This rejection keeps the RSI reading below 60, and if it can push below 40, our bearish momentum is likely to be revived.
Strategy in the US Session
- Now as we gear up for the US session, the 1.42 level will be an important level to monitor.
- We may have bulls and bears battle it out here ahead and into the US session. If the direction is not clear as we start, we may have to wait until 8:30AM EDT, when the jobless claims report come out for the US. Previously at 400K and this week expected to be 401K, the market may use this as a pivot in time for a directional move in the short-term even though this is not a significant release in it of itself.
- A break below 1.4150 then should start the bearish scenario.
- A push above 1.4250, 1.4280 will be a convincing bullish attempt, after which, if the market holds above 1.4250, it can open up the 1.44 resistance target.
- There are still lower supports below the current 1.4122 low.
- If the market breaks below yesterday's low, it is likely heading towards the 1.4054 low.
Range Support:
- The 1.4054 low up to 1.4070 represent a range support zone.
- Range traders who may be short-term bears now, can be short-term bulls from this area.
- However, as a range target, a rally from support may not always make it back to resistance. A conservative target therefore form the 1.4055-1.4070 support zone is back towards the 1.4280 line, which is at about the middle of the range, and is near the 200SMA for the 4H chart.
EUR/USD 8/11/2011 4H Chart

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Fan Yang CMT
Chief Technical Strategist