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EUR/USD about to Test its Bullish Correction Trendline

Consolidation: The EUR/USD has been in consolidation after bouncing off a low on the year at 1.0462. The 4H chart shows that it popped up to 1.1040 after the FOMC statement, retreated and found support at 1.06. The fact that it held above the 50-period simple moving average in the 4H chart and respected a price bottom showed that bulls controlled the market in at least the very short-term. The RSI held above 40, which also reflected maintenance of the bullish momentum.

EUR/USD 4H chart 3/27

(click to enlarge)

Resistance Holding: This week, price has been trying to break that 1.1040 resistance, but for the most part held below the 1.10 psychological handle. Also note that price held under the 200-period SMA. These are signs that bears are still in control of the medium-term outlook.

Key Support: In the 4H chart we can see a key support around 1.08, given some elbow space below. Here, the current bearish attempt will be challenged by a rising speedline and the 100-, and 50-period SMAs. Furthermore, the RSI will be around 40 – if the bulls are still in charge of the short-term outlook, we should find a bullish attempt as the RSI stalls around 40.

Bearish Scenario: If price falls below 1.0750, it would clear these support factors and open up the bearish outlook especially if the 4H RSI falls below 40. First there might be near-term support around 1.06-1.0650. If price then starts to hold below 1.09 after subsequent bullish attempts, the bearish outlook would grow stronger and the pressure will remain on the 1.0462 low, with risk of extending the prevailing downtrend towards the 1.04 handle.

Bullish Scenario: If price does hold above 1.08, look for continuing pressure on the 1.10-1.1040 resistance area, with risk of extending towards 1.0270, a previous support in February.

EUR/USD Daily Chart 3/27

(click to enlarge)