Forex Technical Update
Previous: EUR/USD in a Throwback from 1.3950; 1.3850 is Key Support to Confirm Bullish Breakout (10/24)
Fundamental Factor: Risk Sentiment and EUR hit a Pothole as Wednesday Eurozone FinMin Meeting is Canceled (10/25)
The EUR/USD edged out some gains above 1.3950, reaching 1.3960 before the US session started. The cautious rally was rejected after the US session opened. A jump in volatility occurred at the US cash open at 9:30 AM EDT. The market basically failed to push above 1.3960, and slid below 1.3880 to establish a double top. This candle established resistance back at 1.3960 and reaffirms the importance of the 1.3850 support pivot as it bounced off this level. Note that a projection of a trendline also reside near 1.3850. The 38.2% retracement level (of 1.3660-1.3960 swing) adds to this cluster as another support factor.
Below 1.3850, the market opens up 50% retracement level at 1.38. Then if the market fails to pull back above 1.3850, the slide can extend toward 1.3775, then really the 1.3680-1.37 lows and psychological support.
If the bullish breakout from last week's consolidation is a head fake, it wouldn't be surprising when looking at the 4H chart. Note that the RSI is struggling to return above 60, which would have reaffirmed the bullish continuation momentum. Instead it looks to be stuck below 60 with a bearish divergence spotted here. This suggests further consolidation. A break below 1.3650 would then show topping, but for now, the bearish scenario is contained to the 1.3680-1.37 level, pending a break below 1.3850.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.