EUR/USD – Monitoring the Near-term Consolidation Range

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EUR/USD - Monitoring the Near-term Consolidation Range

EUR/USD found support at 1.3367 last week after the FOMC monetary policy statement. Then, after a less-than-expected Non-Farm Payroll report, We had another push that brought the pair to 1.3445. This was the high on the week and traders treated it as resistance.

EUR/USD 1H Chart 8/4
eurusd 1h chart 8/4

(click to enlarge)

In the 1H chart, we are seeing the market attempting to find a price bottom, or at least attempt to consolidate a bearish market. The ability to come back to the high on the week last Friday shows there is a chance for further correction. If price can hold above the 1.3405 level, it would respect the central pivot of the short-term “range” and the 100-, and 50-hour simple moving averages. That would be a sign that the bulls are still in charge in this time-frame. Also if the RSI holds above 40 in the 1H chart, the near-term bullish momentum started last week would be maintained.

If the market breaks below 1.34, there is a good chance the pair will challenge the 1.3367 low, with downside risk toward the 1.3295-1.33 lows from Nov. 2013.

In the weekly chart you can see a market that has completed 2 phases of reversal.
1) A double top in March-May.
2) Price broke below the rising trendline from 2012 in July.

EUR/USD Weekly Chart
8/4 weekly chart

(click to enlarge)

The third phase would be a break below the 100-week simple moving averages, which resides around 1.3355. The RSI is also pushing below 40, which is a sign that the bullish momentum in the past 2 years have been lost. This is a sign that we should limit any bullish outlook to the short-term.

IF price holds above 1.3405, and pushes above 1.3445, the first place of key resistance will be around 1.35-1.3510, which was a the consolidation lows in June. Above that, the 1.3650-1.37 area will likely be the last line of defense against bulls reviving the 2-year uptrend. Here, we have the double top base, and the 200-, 100-day SMAs. The daily chart below shows the resistance factors.

A break above 1.37 should expose the 2014 highs around in the 1.3950-1.40 area.

EUR/USD Daily Chart 8/4
eurusd daily chart 8/4

(click to enlarge)

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.