EUR/USD Approaches Triangle Apex

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EUR/USD Approaches Triangle Apex

Consolidation, Triangle: The EUR/USD has been consolidating throughout August so far since falling to 1.3333. The upper resistance of the consolidation range is essentially the August high at 1.3444. Other than just a consolidation, EUR/USD also started forming a triangle as you can see on the 4H chart.

EUR/USD 4H Chart 8/18
eurusd 4h chart 8/18

(click to enlarge)

Bearish Momentum: During this August consolidation, the 4H RSI has tagged by mostly held below 60, which reflects maintenance of the prevailing bearish momentum, when the RSI was dragged down to 20. Therefore, the bias remains bearish.

Bearish Breakout: If price falls back below 1.3360, it should clear below the triangle, and EURUSD would return below the 100-, and 50-period simple moving averages (SMAs). That should put the pressure on 1.3333, with downside risk toward the 1.3295-1.33 Nov. 2013 lows.

Bullish Breakout: A bullish breakout from the triangle would be a sign that the EUR/USD is building a price bottom. This first opens up the 1.3444 August high. A break above this would also break above a falling trendline seen in the daily chart. This would suggest the market is in a bullish correction.

In the bullish correction scenario, we should monitor the 1.35-1.3515 area, which was June’s support pivot. The 50-day SMA will also be around the 1.35 handle as a resistance factor.

EUR/USD Daily Chart  8/18
eurusd daily daily chart 8/18

(click to enlarge)

Momentum: The RSI in the daily chart is now in the neutral area between 40 and 60. If it approaches 60 and stalls and price also stalls after a rally aroudn 1.35, we should be ready for a bearish continuation.

Major Consolidation Scenario: If the RSI pops up above 60 and price pops up above 1.3515, then the bearish momentum would be lost and EUR/USD could be developing at a consolidation more significant than the one in June. If price starts to hold above 1.34 and the daily RSI starts to hold above 40, we can also start considering this major consolidation scenario.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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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.