EUR/USD 1H chart 1/31/2013 9:55AM EST
Consolidation: The EUR/USD has been in the habit of rallying, then consolidating sideways. It did so in a larger degree around mid-January for a couple of weeks. Then last week, we had almost a full week of range-bound action before bullish continuation. Yesterday (1/30), the EUR/USD was again trading sideways showing resistance around 1.3585/90, while setting up support at 1.3540, with another support pivot near 1.3530.
Breakout scenarios: The 1/31 price action set up the support and is showing some pressure towards the consolidation range high. If it breaks it, it continues the bullish trend toward 1.36 handle and beyond. You can tell its in a bull trend by looking at the price action, RSI dynamic, and the alignment moving averages.In the bullish break scenario, you can use the width of the range as a conventional temporary target, which would project to 1.3630-40.
However, a fall back below 1.3530 could be a sign of some correction ahead. In the bearish break scenario, we are looking at last week’s consolidation range as a target/support to test, down tot he 200-hour SMA, which sits above teh 1.34 handle, near last week’s consolidation lows.
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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