Forex Technical Update

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EUR/USD 4H Chart 8/17/2012 6:55AM EDT

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The EUR/USD has been range-bound all week, trading roughly between 1.2255 (the 1.2240 pivot was from last Friday, 8/10) and 1.2385 as seen in the 4H chart. Also note that the 4H RSI reading has been stuck between 40 and 60 this week, a reflection of the consolidation momentum. As we gear up for the 8/17 US session, the market sits just under this week's range high with the RSI at 60.

Also note that the EUR/USD is at a declining trendline. The market was at these price levels last Friday and a sell-off pushed toward 1.2240. Will there be the same insignificant whippy action?

Looking at the daily chart, we see that the euro-us dollar is almost at the apex of converging trendlines.

This congestion price action sets up for some key fundamental trigger to push it out of the trendlines. A break out to the downside, followed by clearing the 1.2240 support pivot should open up the July low near 1.2040. An upside break and clearing of 1.2440/50 pivot exposes the correction to 1.2685 and 1.2750, though against the trend, we should probably monitor psychological handles at 1.25 and 1.26 as well.

The 1H chart shows a bearish divergence. The market has followed divergences with reversals all week. Will that be the case today?

EUR/USD Daily Chart 8/17/2012 7:00AM EDT

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EUR/USD 1H Chart 8/17/2012 7:22AM EDT

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Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.