EUR/USD 4H chart 1/23/2013 8:00AM EST
Consolidation Range: The EUR/USD established a consolidation range last week between1.3403 and 1.3255, with possible support down to a 1.3246 pivot. As you can see, this is a sideways market in the short-term after a bullish market that actually started back in July 2012. Note the 4H RSI reading stuck between 40 and 60, a sign that EUR/USD lacks direction. However, you note the bullish bias with price above the 4H 200-SMA.
Breakout: As a trader, a breakout in the direction of the trend (bullish) would be preferred. A rally above 1.3405 for example could revive the bullish outlook that has the 2012 high of 1.3485 in sight. A breakout target using the width of the range would project to (1.3403+(1.3403-1.3255)), which is about 1.3550. A way a trader could show this bias in following trends is to trade this bullish breakout with more confidence, and larger position size than a break to the downside if EUR/USD slides below 1.3445 for example.
Also in this bearish scenario, there is the 1.32 psychological handle at 50% retracement, and more aggressively the 61.8% retracement at 1.3152, which was also the December consolidation support, as targets/supports. Only a break below 1.3150 should open up further bearish outlook, after which stronger position size could be added to the downside with more evidence of a bearish trend (reversal against July-January rally) 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.