Forex Technical Update
Risk-off Trading: Risk aversion to start the week has been filtered through the currency market more so in currencies like the CAD, AUD, and NZD, with the EUR getting some pressure as well. However, the sterling is hanging on. The 1H chart shows the market respecting 61.8% retracement of the latest bull swing from 1.5666 to 1.5851. This rally was a confirmation that our technicals from last week is biased toward being a double bottom (strength building pattern). The RSI reading in the 1H chart is also trying to stay above 40, and if it can push back above 60, we have maintained the bullish momentum from that bull swing.
Pullback: Looking at price action, we can see a common pivot near 1.5780, acting as resistance last Thursday and Friday, while acted temporarily as support after the week opened. The short-term topping that occurred after the week started will become a weak signal if the market pushes back above 1.5780-1.58. A break above re-opens the 1.5850 high, and then the 1.59 pivot.
Bearish outlook: Looking at the 4H chart, we see that the current low also represents the 200-period simple moving average, and the low of a doji candle (one that shows indecision). A break below this indecision candle thus reflects bearish decision. Of course, then the 1.5670 area becomes another challenge. Below that we have the 1.55-1.5540 zone as the next key support. Because we have already lost the bearish momentum, a new bearish attempt should be seen in the context of consolidation, and thus the maximum target for now should not be lower then the 1.55-1.5540 zone.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.