Consolidation: The EUR/USD has been consolidating since making a low on the year at 1.11. The move to 1.11 followed the ECB’s announcement of QE. Since then, the currency pair has been consolidating as we can see in the 4H chart.
The 4H chart shows that the consolidation came up to about 1.15 before stalling. This was around the support area of a previous consolidation during 1/16-1/22 (before the ECB),.
More Consolidation: Both a hawkish FOMC report and a strong NFP report last Friday failed to drag the EUR/USD lower through USD-strength. Instead EUR//USD has been holding above 1.1270. It is reasonable to see that as a sign that the markets wants to continue consolidating instead of continuing the downtrend – a bit of exhaustion.
Failing to Test Resistance: However, the bullish outlook is looking weak as well. Price failed to push above 1.1370, a key resistance within the last 2 weeks of consolidation action. Then, during the first half of the 2/11 session, price failed to even test this resistance. This shows weakness, and suggests the market has a good chance of breaking below the 1.1270 level during the US session.
Near-term Bearish Bias:
The near-term, 1H chart shows the market coiling. Even though the reaction to the NFP did not push below 1.1260, it did create bearish bias in the near-term. Note that price is now holding below the 200-, 100-, and 50-hour simple moving averages (SMAs) and the RSI is holding below 60 after tagging 30. This shows that bears are still in control in the near-term, and that control can extend into the short-term if price breaks below 1.1270.
This bearish scenario exposes the 1.11 low on the year with risk of pushing lower towards the 1.10 handle.
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