Consolidation, Triangle: The EUR/USD has been consolidating throughout August so far since falling to 1.3333. The upper resistance of the consolidation range is essentially the August high at 1.3444. Other than just a consolidation, EUR/USD also started forming a triangle as you can see on the 4H chart.
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Bearish Momentum: During this August consolidation, the 4H RSI has tagged by mostly held below 60, which reflects maintenance of the prevailing bearish momentum, when the RSI was dragged down to 20. Therefore, the bias remains bearish.
Bearish Breakout: If price falls back below 1.3360, it should clear below the triangle, and EURUSD would return below the 100-, and 50-period simple moving averages (SMAs). That should put the pressure on 1.3333, with downside risk toward the 1.3295-1.33 Nov. 2013 lows.
Bullish Breakout: A bullish breakout from the triangle would be a sign that the EUR/USD is building a price bottom. This first opens up the 1.3444 August high. A break above this would also break above a falling trendline seen in the daily chart. This would suggest the market is in a bullish correction.
In the bullish correction scenario, we should monitor the 1.35-1.3515 area, which was June’s support pivot. The 50-day SMA will also be around the 1.35 handle as a resistance factor.
(click to enlarge)
Momentum: The RSI in the daily chart is now in the neutral area between 40 and 60. If it approaches 60 and stalls and price also stalls after a rally aroudn 1.35, we should be ready for a bearish continuation.
Major Consolidation Scenario: If the RSI pops up above 60 and price pops up above 1.3515, then the bearish momentum would be lost and EUR/USD could be developing at a consolidation more significant than the one in June. If price starts to hold above 1.34 and the daily RSI starts to hold above 40, we can also start considering this major consolidation scenario.
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