EUR/USD Started a Small Rising Channel or a Flag Pattern

by Admin

Awards 2013

EUR/USD 1H chart 2/28/2013 9:01AM EST

EURUSD

Rising Channel: In the short-term 1H chart, the EUR/USD looks like it is trying to form a small rising channel off the 1.3018 low. It has so far tagged 1.3160 during the 2/28 session, and fell back to 1.31, which acted initially with some support. I think holding above 1.3080 should keep the rising channel intact. Falling below 1.3070 for example should clear the channel support and should be a sign of a breakdown, and possible bearish continuation, at least with the 1.30-1.3017 area in focus.

Otherwise, there is still more room to the 61.8% retracement (1.3203) of this week’s 300-pip slide from 1.3318 to 1.3017.

Flag pattern: As we take a look at the 4H chart, we see that EUR/USD h as been bearish in February. The RSI has stayed under 60 and tagged 30 several times indication bearihs momentum. The trend also looks like it was picking up strength with the moving averages in bearish alignment, that is until it started to form the “rising channel”. But in the 4H chart, this channel looks more like a flag pattern correction against the February decline.

Let’s see what happens if the market brings EUR/USD up to 1.32 or even higher (1.3253, 78.6% retracement) into the falling trendline area, AND the RSI gets to 60 again. If the market is to remain bearish, it should not push the RSI above 60, and price should not push above the falling trendlines.

Broken trendline: Also note that the earlier downswing was a breakout swing, breaking down a rising trendline going back to July. Therefore, there is still a lot of bearish pressure against the currently developing channel, or flag, giving more reason to believe a break of the channel/flag support can be a bearish continuation signal.

EUR/USD 4H chart 2/28/2013 9:03AM EST

EURUSD

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