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EUR/USD Confirming Flag Breakout; 2013-Lows in Sight

EUR/USD is confirming the bearish continuation signal that followed the FOMC event risk. After the flag pattern breakout seen in the 4H chart, we saw EUR/USD fall to a new low on the year, but rebound from 1.2834. 

Then after the pullback, price held at 1.2930. There were factors for resistance around the 1.2930 area, and the market indeed sold EUR/USD from 1.2930, maintaining a bearish outlook by the time we get the 9/19 US session started.

(EUR/USD 4H Chart 9/19)

The moving averages, price action, SMA-price relationship, and the RSI reading in the 4H chart all point to a bearish market. It is almost too perfect from a technical perspective. However, our downside might be limited for now. In the short-term, the current swing has room to fall until the 2013-lows in the 1.2745-1.28 area. 

In the weekly chart, we can also see the 61.8% retracement level at 1.2787. Furthermore, if price does fall to this area, the 4H, daily, and weekly RSIs will all likely be in oversold territory. The weekly and daily RSIs are essentially there already. 

(EUR/USD Weekly Chart)

so, with such a key support area and pending oversold conditions, we should expect some consolidation around 1.2750-1.28, with upside risk back toward 1.30. We should definitely limit our bullish outlook from this support because the prevailing trend is still intact, and the ECB and FOMC continue to divergence in monetary policy direction.