Short-term Price Bottom:
Over the past few sessions, EUR/USD has come down to a fresh low on the year at 1.3333 (8/6). It has then been trading sideways, with a failure to reach 1.3333 during the 8/7 session. As we get to the US part of the 8/8 session to wrap up the week, EUR/USD has broken above the previous session high around 1.3390, pushing above the 1.34 handle. Also,
1) price is trying to push above the 200-hour Simple Moving Averages (SMA)
2) the 1H RSI is pushing above 60, showing loss of bearish momentum established earlier in the week.
In the very short-term, EUR/USD appears to be building a price bottom for further consolidation.
Also, consider the fact that yesterday’s bearish attempt occurred after the ECB statement and press conference. The initial reaction was bearish, but the failure to reach the 8/6 low of 1.3333 suggests the EUR/USD is also in consolidation.
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Support for Pullback:
Let’s say the current rally gets faded, if price approaches the 1.3365 area, we should look for support. If the market is indeed attempting a price bottom, it should hold above the 1.3365 area, which was a local support/resistance pivot.
In the scenario that price holds above 1.3365 and returns back above 1.34, the next resistance pivot will be at 1.3444, which was last week’s high. The ability to reach last week’s high would reflect the market shifting sideways in the short-term. If price rises above 1.3445, 1.3475-1.35 area will be a key resistance.
There is a bullish divergence in the daily chart, also suggesting we should anticipate a period of consolidation. If there is a short-term rally in this consolidation, we should also monitor the falling trendline seen in the daily chart, which is likely to challenge a rally as it approaches the 1.3475-1.35 area.
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A break below 1.3360 however would be a sign that the price bottom is failing, and put the focus back to the 1.3333 low, with downside risk continuing towards the Nov. 2013-low of 1.3295-1.33.
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