EUR/USD Bullish as it Approaches a Short-term Triangle Apex

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EUR/USD Bullish as it Approaches a Short-term Triangle Apex

EUR/USD was bullish last week, rallying from 1.2247 to 1.2495. Since then, it has been consolidating in what appears to be a short-term triangle in the 1H chart.

EUR/USD 1H Chart 12/16
eurusd 1h chart 12/16
(click to enlarge)

As EUR/USD consolidates, it is maintaining the bullish bias and momentum in the short-term.
1) Price is holding above the 200-, 100-, and 50-hour simple moving averages (SMAs).
2) The SMAs are now sloping up and are in bullish alignment.
3) The RSI has tagged above 70, which reflects bullish momentum, and has held above 40, which reflects maintenance of this bullish momentum.

Bulls in Charge: During the 12/15 session, we saw a strong outside bar push towards the 1.2480 level. Price has retreated, but is still holding above the triangle support and moving averages. As we get started in the 12/16 session, price is approaching the triangle apex.

Bearish Scenarios: A bearish break (below 1.2415), would only open up a near-term bearish outlook toward what looks like a key support for the short-term in the 1.2340-1.2360 area. A break below 1.2340 could be a sign that EUR/USD is turning bearish in the short-term, back to the mode in the medium term seen on the daily chart.

When we look at the daily chart, we can see that the medium-term trend is still bearish, even though price has broken above a falling wedge as we can see in the chart below.

EUR/USD Daily Chart 12/16
eurusd 12/16 daily chart
(click to enlarge)

Still Bearish: Before we get too excited about the bullish breakout, we have to note that price action is still making lower highs and lower lows of significance, and price is still under the 50-day SMA. Furthermore, the RSI holding below 60 reflects maintenance of the bearish momentum since May.

Upside Risk: A break above 1.26 with the RSI pushing above 60 could be a sign that EUR/USD is at least turning sideways – we would call EUR/USD neutral-bearish. At that point, there would be a upside risk in the short-term towards the 1.27-1.2750 area, where price will likely meet the falling trendline from May as well as the 100-day SMA.

So, we should respect the short-term bullish outlook, but within the context of a bearish market in the medium-term. Therefore, we should limit the bullish outlook to 1.26 for now, given that price can hold above 1.2340-1.2360 area, preferably even staying above 1.24 for a clearer bullish picture.

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