EUR/USD – 1.2340-1.2360 is Key Barrier for Bearish Outlook

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EUR/USD - 1.2340-1.2360 is Key Barrier for Bearish Outlook

Losing Bearish Bias and Momentum: This week EUR/USD has rallied from a fresh low on the year at 1.2247 up to 1.2447, near a resistance pivot from last week. The 1H chart shows the pair losing the bearish bias and momentum as price crosses over the 200-, 100-, and 50-hour SMAs, while the 1H RSI tagged 70, showing some bullish momentum in the very short-term.

EUR/USD 1H Chart 12/10
eurusd 1h chart 12/10
(click to enlarge)

Bearish Structure: Now, it should be noted that after this swing, the EUR/USD still has a lower high and a lower low so the structure still reflects the prevailing downtrend.

1.2340-1.23360: Now, to the downside, we can see an intrasession support pivot at 1.2360, shared earlier in the month. We can also see support/resistance and the 100-, and 50-hour SMAs around 1.2340. This 1.2340-1.2360 area is therefore a key barrier for the bearish continuation outlook. In other words, price will signal bearish continuation is if can break below 1.2340. But if this area provides support, EUR/USD is still in a bullish mode in the very short-term

On the 4H chart, we can see that EUR/USD is currently at a crossroad.

EUR/USD 4H Chart 12/10
eurusd 4h chart 12/10
(click to enlarge)

Falling Channel Resistance: This week’s rally pins the pair against a falling speedline from a November resistance pivot near 1.26. The 4H RSI is holding below 60 for the most part. So far, the bearish outlook revived a few weeks ago is still in play. So, we have a bullish attempt seen in the 1H chart, supported above 1.2360, against a bearish mode seen in the 4H chart providing a falling channel resistance around 1.2440.

The Bearish Scenario: A break below 1.2340 should revive the bearish trend and open up at least the 1.2280-1.23 area in the near-term, before the 1.2247 low on the year. Because the prevailing trend would be intact, there will be risk of the EUR/USD breaking below 1.2247 towards the 1.22 handle.

A break above 1.2450 would clearly break above the channel, and make a higher high of significance. This scenario would put EUR/USD into a consolidation mode, with upside risk back towards the 1.2575-1.26 area, and with downside risk now limited to 1.2275-1.23 area, and at least back to the 1.2250 low.

Previous  Post by Author: Silver Breaks Above a Key Falling Trendline from July

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.