Since yesterday we have witnessed majors attempting to incline yet lack the bullish momentum needed to confirm the uptrend and since today lacks major fundamentals, we may witness similar consolidation and perhaps the continuation of further downside corrections to gather enough strength to resume the general upside rally.
The critical support at 1.4880 limited further declines for the Euro versus dollar pair as it recorded a low so far of 1.4888. We currently see trading is at the 20 MA on the four hour charts at 1.4930 and as indicators suggest, the pair may decline from around these levels to perhaps form a possible bearish technical pattern (head and shoulders top). Our suggest scenario remains valid as far as trading is below 1.4995 where a successful breakout of the neckline may take the pair to 1.4770 – 1.4790 levels. The ADX indicator is showing how week the current uptrend is as it trends at 16.68 whereas the RSI and stochastic and RSI indicators remain neutral for the time being.
Despite surging yesterday to near the 1.6490 level, the cable failed to maintain trading above the 38.2% correction at 1.6430 suggesting the downside movements remain possible. Although momentum indicators on the four hour charts show adjustments to the upside, yesterday's bearish daily closing may pressure the pair further south. Our outlook is also supported by the divergence on the daily charts suggesting the pair may still target 1.6265 and 1.6140 on the short term.
After retesting the breached neckline for the head and shoulder's bottom pattern discussed previously on the four hour charts, the pair was able to rebound to currently trade around 90.65. Indicators on the daily charts suggest the pair is still to decline further as it loses bullish momentum which then may form a bigger head and shoulders bottom pattern on the daily charts which may open the way for the pair to target 95.85 on the short term.