Forex Technical Update

Prev: Euro Relief Fading Against USD, GBP, JPY and CHF (8/8)

EUR/USD
eurusd08092011h1
Double Bottom
- The EUR/USD fell to 1.4150 cracking it but for the most part respected the area. The RSI in the 1H chart also mainly remained above 40, showing a chance to maintain the bullish momentum that started Friday.
- Also note a possible double bottom forming. Although the bottoms are not similar nor equal, they represent rejection from going below 1.4150.
- If the current rally breaks above 1.4250, we have a double bottom formation.
- This double bottom however is vulnerable of being faded until we break above the 1.4280-1.43 resistance zone.
Head and Shoulder
- The double bottom would only be a precursor to a larger bottoming formation.
- Looking at the 4H chart, you can observe the following signals:
1) We just completed a 3-swing decline where the downswings are very similar in length (a completed harmonic retracement pattern).
2) The 3-swing decline was completed after support was found at the 61.8% retracement level of the rally from 1.3837 to 1.4535.
3) After the 3 swing decline we finally saw a higher high 1.4370, when the market broke above 1.4370. This break however was rejected, but a break above it from the current rally forms an inverted head and shoulder. This would be the 4th signal. A 5th signal would be the ability for the 4H RSI to push above the 60 reading.
- A break above 1.4370 thus opens up the 1.4450 level, and if it acts as support, the market can push further towards the 1.4535 pivot.
- A failed double bottom however can keep the bearish channel going if the market falls below 1.4150. Then the 1.4050 level is next. Below that, we can be falling back towards the 1.3837.
EUR/USD 8/9/2011 4H Chart

Subscribe and become a member to share your views and join live discussions as well as webinars about the markets.
Fan Yang CMT
Chief Technical Strategist
FXTimes