EUR/USD on the Move – Bearish Continuation Signal

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EUR/USD on the Move - Bearish Continuation Signal

EUR/USD remains bearish after tagging a 1.2577 high on the week during the 11/4 session. So far in the 11/5 session, price has retreated, accelerating after the European session started. There was not much news to go on, but there was a general move of USD-strength that pulled the EUR/USD below this week’s rising trendline.

EUR/USD 1H Chart 11/5
eurusd 1h chart 11/5

(click to enlarge)

The 1H chart shows the break below a trendline and below the 200-, 100-, and 50-hour SMAs. EUR/USD looks poised to test that 1.2440 low on the month and year with strong risk of breaking lower since the prevailing downtrend is intact.

Now, as price approaches 1.2440, traders will be faced with bearish momentum, a support pivot, and a pending ECB monetary policy decision. So, we might expect some consolidation around 1.2440 until after the ECB event.

If price can hold below 1.25 after the ECB event risk, and fall below 1.2440, we should be looking at bearish continuation, with the 1.24 handle as the near-term target this week. The weekly chart below shows the next support levels below 1.24, first at 1.2286-1.23, then the 2012-low at 1.2042.

EUR/USD Weekly
eurusd weekly chart

(click to enlarge)

As noted above, this is a USD-strength story. When we filter out the EUR, we can see that it is actually resilient against other majors. Let’s take EUR/GBP and EUR/AUD for example:

EUR/GBP 4H Chart 11/5
eurgbp 4h chart 11/5
(click to enlarge)

The 4H chart shows a bearish market that is turning bullish in November, at least for the short-term. We saw a break above a falling trendline that extends from October’s high at 0.8046. 0.79 will be a key level to monitor for after the ECB. A break above will confirm a bullish reversal in the short-term which revives the 0.8046 high as a target.

EUR/AUD Chart 11/5
euraud 4h chart 11/5

(click to enlarge)

The EUR/AUD is also in a breakout, and is extending higher today. The 1.4450 level was key and is now broken. Thus EUR/AUD is signaling bullish reversal, opening up the 1.47 high, with risk of further upside, but we will have to wait for the ECB first before getting ahead of ourselves.

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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.