orex Technical Update
The EUR/USD fell from 1.3233 to start the week, back to important levels that acted as support last week. Now this 1.0370-1.0380 support area is also reinforced by a rising channel support, which means the break below it will be even more significant. There is a difference between this test and last week's. That is the 1H RSI last week respected 40, and kept the bullish momentum, where today the RSI almost tagged 30, showing that momentum has flattened.
The first upside target, even with consideration that maybe momentum is flattening and market might be sideways, is the 1.3160-1.3170 resistance from 1/26. Above that, we can open up 1.3233 again, with room to 1.3245 (38.2% retracement seen in the daily chart). Above that, we open up 1.3436 (50% retracement), and 1.3628(61.8% retracement), with the latter being of more importance as it nears a declining channel resistance as well.
But what if the market fails to break above 1.3170, and falls back below 1.3070? That would be a good sign of topping and we can open up 50% retracement of the rising channel as a generic retracement projection. Looking at the 4H chart, you see this is also near the 200 SMA. As the RSI reading in the 4H chart gets close to 40, be aware of a possible rally, especially with the price between that 50%-61.8% retracement seen in the 4H chart. (If the RSI breaks below 40, and price falls below 1.2850, look for a return toward the 1.2623 low.
Fan Yang CMT is the Chief Technical Strategist of IBTRADE and FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.