Forex Technical Update
After the FOMC's pledged to keep interest rates extremely low through late 2014, the USD weakened. This caused a failed double top attempt, which turned into an expanded flat. This was followed by a bull run that pushed above a pivot at 1.3080, and is now above 1.3150. Looking at the 4H chart, the market has defined a new rising channel, and is trading at resistance, as the RSI pushes back above 70, reflecting persistent bullish momentum, but also signaling near-term overbought condition.
The next resistance area is also coming up at the 1.32 pivot, seen in the daily chart as Nov. 25 low and then Dec. 21 high. The RSI reading is also testing 60. Also note a 38.2% retracement market at 1.3245. We can therefore expect some resistance between these two factors. Above 1.3245, we are looking at 1.3436 (50% retracement, and than more importantly 1.3627, 61.8% retracement near a key declining trendline.
To confirm extension of the rally, a hold above 1.3080, preferably above 1.31 upon a throwback from resistance should give the market confidence of a bottom for another short-term bull run toward higher retracement levels. A break below the rising channel shown in the 4H chart will be needed to re-introduce the bearish outlook.
Fan Yang CMT is the Chief Technical Strategist of IBTRADE and FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.