EUR/USD Signals Bearish Continuation with Consolidation Breakout

EUR/USD Signals Bearish Continuation with Consolidation Breakout

Triangle Breakout: The EUR/USD has been bearish, in the past few months, but has consolidated in August. Last week, the pair got into a triangle pattern as you can see in the 1H chart. You can see the cluster of 200-, 100-, and 50-hour simple moving averages (SMAs) in the middle of the triangle, which also reflects a sideways market. While the near-term mode was sideways, we all know the prevailing mode has been bearish in the short and medium-term.

This week, price started to move below the triangle support, accelerating further at the start of the 8/19 US session.

EUR/USD 1H Chart 8/19
eurusd 1h chart 8/19

(click to enlarge)

Range Breakout, Bearish Continuation: The 4H chart shows that the break below the triangle also broke below the August consolidation range between 1.3444 and the 1.3333 support. The 4H chart again looks very bearish based on simply looking at the price action, the moving averages, and the RSI which held below 60 for the most part.

Oversold: The 4H and 1H RSI are now dipping below 30, which shows oversold condition in the near-term. If we get some intra-session pullback, we should probably expect resistance in the 1.3340-60 area, the lower area of the broken consolidation range.

EUR/USD 4H Chart 8/19
eurusd 4H chart 8/19

(click to enlarge)

Support: The next support will likely be in the 1.3295-1.33 area, the lows from November 2013. We should expect some support here. If there is, then we might see a bullish divergence, which suggests some consolidation.

Below 1.3295, the Sept. 2013 lows around 1.31-1.3105 should be another level we should expect support.

EUR/USD Daily Chart (8/19)
eurusd daily chart 8/19

(click to enlarge)

Data Points Didn’t Matter: The dip in EUR/USD today came after the release of US data, which showed slower inflation in July, but a slight improvement in housing permits issued and housing starts in July. The soft US inflation data should have more impact here, and should have been negative for the USD. The fact EUR/USD fell so sharply suggests that euro-bears are in full control here at least in the short-term, with downside risk toward that 1.3295-1.33 low from Nov. 2013.

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