EUR/USD 1H Chart 11/6/2012 8:55AM EST
Double Bottom: The EUR/USD is in a key support area between 1.2750 and 1.28. Breaking below 1.28 is already a sign of bearish strength. However, over the latter 11/5 session and first half of the 11/6 session, the EUR/USD has formed a double bottom. You can argue that the 2nd bottom is lower, but the RSI reading has a higher low so you still see a bottoming technical development.
These might be a sign of a near-term relief rally with resistance pivots at 1.2845 and then 1.2880. If we do get a bounce, let’s see how the market reacts around these levels. Note that the 1H RSI reading is still held under 60 so the bearish momentum is still intact.
Double Bottom: The EUR/GBP has also been stepping on a key support around the 0.80 psychological support, which is reinforced by a rising trendline going back to the July low of 0.7755. The pair appears to have cracked the trendline as well as dip below 0.80, but has since consolidated around 0.80. Just like the EUR/USD, the EUR/GBP formed a double bottom in the beginning part of this week. And just like EUR/USD, the 1H RSI reading is under 60, a break above which gives more weight to the double bottom and correction rally scenario.
The correction scenario has a key resistance pivot at 0.8075 if it gets there. If the bearish outlook remains, there is a falling resistance at about 0.8030 for possible resistance. If the correction extends above 0.81, then it is probably not just a correction, but a possible development of a bullish cotninuation with 0.8158 high in sight before exposing the 0.82 handle and a 0.8217 pivot.
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.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.