Analyst Paul Ebeling of takes a look at the EUR/USD Trading Week ahead.

Weekly Forex Report: EUR-USD pair – setting up a Declining Channel or Flag Correction

Channel, flag: The EUR-USD topped off the day Thursday, and continues to correct against the latest upswing that started last week from 1.2825.

The 1H chart shows the decline within a channel, or if this is just a correction pattern, it could become a flag pattern.

A break above the flag pattern, and above the 1.3085 area could be a Bullish continuation signal in the short-term.

Support: Until there is a break above the near-term correction pattern, the focus is on the recent support factors. The 1st one is near the 38.2% Fibo retracement at 1.3017, which is also near the 16 October support pivot. Not major support, but could offer some demand. Last week’s high at 1.2996 may be more important support. Holding above this and 1.30 will be a good sign of continuing Bullish development. The Bullish outlook gets murky below 1.2995. The 1.2980 coincidence of 200-hr SMA and 50% Fibo retracement might provide some support too.

Breakouts: The Bearish outlook creeps back into the picture if this “correction” extends below a 61.8% Fibo retracement, 1.2940, and the rising trend line going back to May 2012. The Bullish outlook is also limited in here to a declining trend line going back to March 2011.

So, it is prudent to monitor these trend lines for directional clues in the medium term, outside of these short-term swings observed since mid-September.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.