Forex Technical Update
The EUR/USD failed to maintain the bullish bias reported in the last update. Instead, after cracking the 1.3311 high, the market fell back slowly below the levels prior to the ECB meeting and then the rising trendline seen in the 1H chart. As the 2/10 European session got under way, the EUR/USD continued lower breaking below the 1.3215 pivot and even pushing below 1.32 by the time the US session started. The 1H RSI pushed below 30 showing establishment of short-term bearish momentum.
Looking at the fibonacci retracement levels, we see that the most near-term support is at the 1.3174 50% retracement level, coincident with the 200 H SMA. If there is a pullback from here, failure to break back above 1.3250 should be a sign that bears are still in charge. A break below 1.3174 has another challenge at 1.3140-1.3150 support area. From here, the market might consider turning back up, especially if the RSI reading is near 40 in the 4H chart. But again, the 1.32 up to 1.3250 area acts as a resistance if the market is to respect the topping attempt made this week. Above 1.3250, 1.3320 should be re-tested for the bullish continuation scenario.
Looking at the 4H chart, it should be noted that the 1.3140-1.3150 area is just above the rising trendline, another support factor and reason why the market might return to the bull run if held above. On the other hand, falling below this trendline makes the case for a more significant correction. 1.3154(38.2% retracement) is first. Then 1.2972, 50% retracement is coincident with the 4H 200SMA and could be a viable target for reward to risk assessment after a break below the trendline.
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Fan Yang CMT is a forex trader, analyst, educator for IBTrade; and main contributor for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.