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EUR/USD Rebounds - 1.27 is a Key Resistance

EUR/USD started the week with support at 1.25. It rallied through the 10/6 session and is starting the 10/7 reversing the reaction that followed Friday's strong NFP report. However, we should be wary of sellers now that the EUR/USD has rebounded. 

The 4H Chart shows the EUR/USD in a clear downtrend, based on the moving averages and price action showing lower highs and lower lows. The RSI has also held below 60 after tagging 30, showing persistent bearish momentum. 

EUR/USD 4H Chart 10/7(click to enlarge)

As we begin the 10/7 session, price is back at the 50-period SMA, and the RSI is approaching 60. We should also note a falling trendline from mid-September, and resistance pivot and September high at 1.27. When price is around 1.27 and the 4H RSI around 60, we should anticipate sellers since the prevailing trend is still intact. 

If price pushes above 1.27, and the 4H RSI pops up above 60, we could start considering buying on a dip, although a better indication would be if the 4H RSI tags 70 and subsequently holds above 40. This might require an entire week of price action to give us a reversal, or at least a meaningful bullish correction signal. Otherwise, the bearish outlook should be maintained.