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EUR/USD in a Bearish Continuation Breakout

The EUR/USD has been tricky so far this week. It started with a dip to 1.3180 and consolidated around 1.32 for a couple of sessions. Then it dipped to 1.3152 but rebounded. Apparently the theory that gaps tend to be closed first before the trend continues is true in this case, and the EUR/USD reached back to tag 1.3220, last Friday's low, before retreating again.

As we enter the 8/28 US session, we see a break below a near-term rising trendline. Price also broke below the 1.3180 level again, and returned below all of the 200-, 100-, and 50-hour simple moving averages (SMAs).

(EUR/USD 1H Chart 8/28)

If price can hold below 1.32, I think the EUR/USD is ready for bearish continuation. When we look at the 4H chart, we can see a very bearish market. Despite a break above a short-term falling trendline, the moving averages and the RSI reading reflect a bearish market. In fact the RSI shows a negative reversal - when after the bearish momentum is established, the RSI makes higher highs while price makes lower highs. This suggests another downward swing for another low. This other low could be the September 2013-low at 1.3105.


(EUR/USD 4H Chart 8/28)