Last week, EUR/USD found support at 1.0818 and rebounded to about 1.10. In the 1H chart we can see that this rally was in the form of a rising channel, which we can assess as a flag pattern in the 4H chart.
The Bearish Signs: First of all, note in the 1H chart that the rally has broken above the 100- and 50-hour simple moving averages (SMAs) but failed to break above the 200-hour SMA. Thus the mode is still neutral-bearish, with emphasis on the bearish since the prevailing trend is bearish. Second, note that the RSI has failed to clear above 60. There were a few brief cracks above 60, but the failure to stay above reflects the fact that the prevailing bearish momentum is still in play.
As we begin the week, price is falling and is now threatening to break the rising channel support. A break below 1.0925 should clear the rising support as well as the 100- and 50-hour SMAs. If this occurs with the RSI falling back below 40, we are likely in a bearish continuation scenario, with pressure on 1.0818 this week.
Now, to the upside the 1.0974 pivot is important. If there is a pullback whether 1.0925 is broken or not, a hold under 1.0974 would reflect bearish bias. If 1.0925 was not broken yet, it will likely break and give way to a bearish attempt towards 1.0818. If 1.0925 was already broken, then a hold under 1.0974 would confirm the shift back to the bearish mode, with the same outlook towards 1.0818.
The 4H chart shows that the “channel” seen in the 1H chart is essentially a flag, or pennant pattern. The bearish outlook in the 4H chart is even more clear. Even though a falling trendlien was broken, price is still holding under the 200-, 100-, and 50-period SMA and the 4H RSI is holding under 60.
Now, if price does climb back above 1.0974, the next key pivot to monitor for resistance will be around 1.1065. Resistance here would keep the bearish outlook intact.
It might take a break above 1.1150 to open up the bullish outlook.
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