Forex Technical Update August 16, 2010
 EUR/USD - 1.2750 Providing Support
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  • 4H: In last Friday's weekly update, the EUR/USD was projected to find some support at the 1.2750 area. A break below that suggests further decline towards 1.2450.
  •  There has not been a reversal from this level, but the EUR/USD is stalling its rapid decline of last week just above the 1.2750 area.
  • In the 4H chart, you can a bullish divergence. However, there could also be a negative reversal forming. This suggests that although the bearish momentum is slowing, there is no confirmed bullish momentum, so further exhaustion can follow.
  • In any case, the above chart shows a bullish scenario if the market were to rally. It appears to have developed 3 downswings, so that means an impulse wave down to be followed by corrective waves up.
  • Corrective waves can be projected to the 50% retracement or 1.3020 area. A break above 1.31 should bring back the bullish outlook, or at least, ranging outlook for the intermediate term.
  • The 1H chart, not shown here is about to give a bullish signal, if the RSI reading can rise above 70.

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  • Daily: The 1.2750 area is providing support, and today's price action may be strong enough to signal a short-term rally. If this short-term rally breaks above 1.31, it may signal further short-term rally.
  • At the moment, there may be a positive reversal developing. If so, the suggested projection is the previous high at the 1.3345 area. This would satisfy a truncated fifth wave, although the terminal wave can extend further towards 1.35.
  • If these bullish scenarios become unlikely as the week progresses, the market must be sustaining the USD recovery, and further decline in the EUR/USD can lead the pair to seeing the 1.25 area.
  • If the 1.2450 breaks, the bottom is open for further decline.

  Fan Yang
Currency Analyst
Commodity Trading Advisor

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