EUR/USD 1H chart 6/27/2013 9:55AM ET
(click to enlarge)
Relief rally: The EUR/USD continues to be bearish since last week’s reaction to the Fed’s taper talk. This week it made a low at 1.2984 before climbing back up in a relief rally. It is now testing its first set of resistance factors, which includes a falling trendline resistance and then a support/resistance pivot around 1.3055. A break above this level can signal a period of consolidation.
Breakout: If the market does break the trendline and above the 1.3055 pivot, the first support/resistance pivot will be in the 1.31-1.3105 area. Above that 1.3150 is the next pivot and should probably be the limit to this very short-term bullish outlook, though some might argue that this break opened up the 1.3255 pivot where the trendline started. I would call that an aggressive outlook that can develop but over a few swings. The RSI would have to push above 70 and stay above 40 in a subsequent retracement.
Failure: If the market does not give EUR/USD a bullish correction and the 1H RSI holds under 60, the momentum is still bearish with downside risk toward a 1.2955 support pivot, which might coincide with a rising trendline projected from May’s lows (seen in the 4h chart).
EUR/USD 4H chart 6/27/2013 10:00AM ET
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes