The EUR/USD has been consolidating between the 1.35 low and Monday's high just below 1.37, near 1.3695. As the market gears up for Tuesday's US session, it is pushing the pair towards resistance. The market is breaking 1.37 and if it can remain above it in the US session, it opens up higher correction targets, first being the 1.38 level. This is 38.2% retracement of the swing from last week's high to this week's low so far. A more aggressive 50% retracement targets the1.3890 level. Both of these levels represent consolidation areas, 1.38 on 9/9, and 1.3890 on 9/8. The market is still bearish in the medium-term and in fact these price levels can bring in Euro-bears waiting to sell on a bounce. Only a break above 1.40 closes the current bearish mode. If instead of staying above1.37 in the US session, the market falls below 1.35, we open up a bearish outlook towards the (1.29 near-2011 low) to 1.30 (near Dec 2010 low) . This scenario is stronger if the market breaks below 1.34 as well because there is a pivot at 1.3460, and 1.34 is a psychological support.
Fan Yang CMT is Chief Technical Strategist of IBTRADE.