EUR/USD Breaks Down Consolidation Range

\ 7:03 AM EDT \ January 3rd, 2013
Forex Technical Update

Previous: EUR/USD Starts the New Year with a Bang toward 1.33 (1/1)

EUR/USD 4H Chart 1/3/2012 7:00AM EST

EUR/USD 1/3/2012 4H chart

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.

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.

Please login to comment. Dont have an account? Register