EUR/USD Hovering Above 1.26; Lookout for Sellers on a Rally

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After falling this week, EUR/USD found support just above 1.2605, which was a previous support pivot. However, if there is a bullish attempt from this area, we should look out for sellers. The reason is that EUR/USD might be signaling bearish continuation after breaking below October’s rising trendline this week.

EUR/USD 4H Chart 10/23
eurusd 4h chart 10/23
(click to enlarge)

Price also broke below the 200-, 100-, and 50-period simple moving averages (SMAs), while the 4H RSi dipped below 40 to show loss of October’s bullish momentum.

At this point, price is poised to test the 1.25 low with risk of further downside.

Let’s entertain the probability of a bullish attempt above 1.26. In this scenario, we should look at 2 areas for resistance.

The 1.27 level would be a psychological resistance. However, if the market needs to consolidate a little further before continuing the downtrend, the 1.2725-1.2750 area will be key. In the 1H chart, we can see that there is the 200-, and 100-hour SMA around 1.2730. This 1.2725-1.2750 area is also a support/resistance pivot area for price action going back to last week.

EUR/USD 1H Chart 10/23
eurusd 1h chart 10/23

(click to enlarge)

If price starts to hold above 1.27, and is able to break above 1.28, then the consolidation/bullish correction scenario is still in play, and we should look for price to test the 1.2887 high – 1.29 handle, with upside risk toward 1.30 if that area is broken.

EUR/USD Daily Chart 10/23
eurusd daily chart 10/23

(click to enlarge)

The 1.30 level will be another key level to watch for sellers. In the daily chart, we can see that 1.30 is near a previous resistance pivot and the September high. The falling trendline from the high on the year from 1.3993 will also likely reinforce the area around 1.30 as resistance. Finally, if price pulls up to 1.30 and stalls, while the daily RSI pulls up to 60 and stalls, we should be ready for a bearish continuation attempt.

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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.