Forex Technical Update

Previous: EUR/USD Holding near 1.28; Challenged by the 2012 Declining Trendline (9/10)

EUR/USD Daily Chart 9/11/2012 6:40AM EDT


Rally stalls: The EUR/USD continues to consolidate under a declining trendline that's held 2012 price action bearish. The daily chart shows a confluence of factors that's challenging the bull run since late July from the 1.2042 low, the most important one being the trendline going back to the 2/29 and 2012-high of 1.3487.

Sideways but bullish: Price action during the 9/10 and so far into the 9/11 session before US trading has been for the most part sideways, as seen in the 1H chart. However, you can also say that the euro has a bullish bias against the US dollar because:

1) The market found support at 1.2750, which was a previously monitored resistance pivot (high from 6/18/2012), as shown in the daily chart. If the EUR/USD can stay above intra-pattern pivot at 1.2770, the bullish bias continues to build.
2) The market actually pushed EUR/USD to a new high of 1.2820, but just 5 pips above the previous near-term high, before finding some resistance.
3) The 1H RSI reveals bullish momentum intact as the reading remained above 40 after falling from above 70. It is now back above 60, showing intact bullish momentum and suggesting that the pair is ready for continuation.

Bullish outlook: A break above 1.2820 during the 9/11 US session should be simple a sign of the market continuing its trend, with the 1.30 handle as a possible target, but I have some doubt it can get there before the FOMC meeting on Thursday (9/13). 1.2934, 61.8% retracement of the 2012 bear swing from 1.3487 to 1.2042 could be a level of supply ahead of the key risk event.

Bearish signs: Holding below 1.2820, and pushing below 1.2770 suggests the market remains in consolidation. A break below 1.2750 then introduces some bearish outlook, but only in the near-term, perhaps as a retracement ahead of the anticipated Fed policy meeting on Thursday. This would be seen as a double top, with breakout projection toward 1.2695-1.27 area.

The bullish stance remains unless there is a break below 1.2625, a pivot coincident with the 200-hour SMA at the moment. Also the bullish momentum would be lost if the RSI falls below 40.

EUR/USD Daily Chart 9/11/2012 6:48AM EDT


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.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.