The EUR/USD started the week edging out a new low on the year at 1.2816. Then we saw some consolidation. After manufacturing and services PMI data for eurozone countries, which were mixed, the EUR/USD rallied.
EUR/USD 4H Chart 9/23
(click to enlarge)
The 4H chart shows a market still in a bearish market, but attempting to consolidate. As we get started with the 9/23 session, EUR/USD is trading just below 1.29. Right around 1.29, we see the 50-period simple moving average (SMA), and a falling speed-line (kind of like a trendline, but less significant). Furthermore the 4H RSI is approaching 60. If the pair is still bearish in this time-frame, we should see sellers when the RSI is around 60.
Bullish Correction Scenario and Subsequent Outlook:
Now, if price pushes above the mentioned resistance factors, the EUR/USD is back in consolidation, with upside risk first to the 1.2995-1.30 highs from the last couple of weeks. At this point, we should look at the daily chart to assess the integrity of the prevailing trend. Even with a break above 1.30, the downtrend is intact. There is a support/resistance pivot around 1.3160. If price gets to 1.32 or a little higher, EUR/USD will be testing the 50-day SMA, and a falling trendline from the 1.3993 high. That will be a key resistance area if the pair is still bearish. Also, if the daily RSI gets up to 60, we should expect sellers if we believe the market is still bearish in the medium-term.
EUR/USD Daily Chart 9/23
(click to enlarge)
If the market remains bearish in the medium-term, there is downside risk back to 1.2816, and down to the 2013-low at 1.2745.
The other scenario is that the market has shifted from a bearish to a neutral-mode. Even so, before we see any signs of bullish outlook in the medium-term, we can fade a rally, but would just have to limit the bearish outlook – not to expect a downswing to push below the current low of 1.2816 and expect support above it ie. around the 1.2860 support pivot.
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