EUR/USD 4H Chart 1/3/2012 7:00AM EST
Consolidation: In the previous update, I noted that EUR/USD’s failure to break above the 1.3306 resistance and falling below 1.32 would be a sign of weakness with focus back on the recent consolidation range support at 1.3156. The EUR/USD broke down this support during the 1/3 Asian session, and continued to 1.31 during the European session.
Momentum, pullback: The RSI is pushing below 40, a sign of lost bullish momentum. A tag of 30 would reflect the start of some bearish momentum. Now that the market has shown topping action, a pullback can give extra weight to the bearish outlook, or show us that bulls are still in charge. I would take that 1.32 handle as a battle line above which the bearish outlook weakens. A failure to push back above 1.32 therefore shows further downward bias, and an extension below 1.31 opens up lower targets.
Target: A conventional range breakout target, using the width of the range into the direction of the break, projects to 1.3015. This bearish outlook is still within the context of a bull run since the November 2012 low near 1.2662, since it still holds above a bullish trendline, which could be challenged if the EUR/USD pushes below 1.30. Therefore, a break below the 1.30 handle will be needed for further evidence of bearish development.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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