The EURUSD was corrected lower this week after peaked at 1.4842 last week. From a bigger point of view where this pair started the bullish rally since March 2009 from 1.2456 until peaked at 1.4842, this bearish momentum is surely a normal correction. However, I think we are in a very critical technical phase now. Here is why:

Price found resistance around 1.4850 – 1.4950 area.

A look at my daily chart below, we can easily see that 1.4850 – 1.4950 area is a very important area since November 2007. When break above that area at February 2008, price continued to peak at 1.6019 on April 2008. On the other hand, after break below that area on August – September 2008, we see a big bearish movement bottomed at 1.2329 on October 2008.  So I think it’s logical that now I will pay a lot of attention to any reaction around this area.  A breakout to the upside could trigger further bullish momentum at least towards 1.5300 area.

However there are always two sides of the story in forex right? So, in contrary, if price fail to move above that area, we might have potential bearish reversal scenario here. The rising wedge formation support this bearish reversal scenario and the fact that price already made a rejection to move above 1.4850 on September 23 2009 and closed lower at 1.4574 this week might be very important event for the bearish reversal outlook. However price also might make another attempts to break above that area, so nothing is confirm yet here.

In upcoming week, beside 1.4850 – 1.4950 resistance area, I will watch the 1.4280 support area (23.6% Fibo retracement of 1.2456 – 1.4850). Still on my daily chart below, this support area is also a key support level. So as long as the pair able to stay above this area, the bullish continuation scenario should remains intact. However, break below this area could also be considered as rising wedge breakdown and seriously damage the bullish outlook at least targeting 1.3935 (38.2% Fibo retracement of 1.2456 – 1.4850) and could be a beginning of a big bearish reversal journey.

Have a great weekend and see you guys next week!