Forex Technical Update
EUR/USD 1H Chart 7/9/2012 10:50AM EDT
The title for this update is for the 1H chart, where a small flag pattern appears to be developing in low volatility. This comes after the RSI dipped below 30, which is a sign of bearish momentum. However, in June and July, the RSI in the 1H chart has been whipping between 30 and 70, reflecting ranging momentum. If the RSI holds below 60 and returns below 40, we would be seeing bearish momentum building.
So as far as momentum, we can look for resistance as the RSI close in on 60. As far as price, we should look at the previous consolidation support at 1.2360 as a possible resistance factor. A break above 1.24 however makes the bearish outlook a bit unclear, especially if the RSI also breaches 60.
If price Does stay below 1.2360 (and of course 1.24), and the RSI does stay below 60, we would have a "negative reversal". That is when the RSI high is higher (it already is), but the price high is lower. This suggests we have momentum for at least one more swing lower.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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