For the first time since the EUR rally began in early June, the EUR has fallen hard through trend line Support. We know that major Resistance sat at 1.30, however, when the EUR fell through trend line Support it triggered stops below 1.30 and has been unable to recover thus far. The EUR, on Friday’s price action fell below the 100 day MA. If the 50 MA (currently at 1.2650) which is upwards sloping, manages to cross the 100 MA then Support for the EUR rally should remain intact. If the 50 MA fails to cross the 100 MA and also fails to act as Support then the EUR will most likely begin to consolidate around 1.24. Therefore, price action over the next few days will be critical in dictating EUR strength and or weakness.
Crude is trading with high volatility right now so you need to be careful where you place your Support and Resistance lines. There are clearly two competing technical forces at play. There is a Step pattern, in which we have seen higher highs and higher lows, which suggest strong sustainable momentum is building. However, more immediate price action has sent Oil crashing below all of it’s major MA’s. Additionally, and due to the distance of the nearest Low, a close below 71.50 could signal continued weakness ahead. Lastly, with the 100 MA poised to cross below the 200 MA, aligning the major MA’s in an order consistent with falling prices rather than rising prices it would certainly make it challenging for Oil to reverse the recent change in momentum.
We have always stated that consolidation is the precursor to a breakout. This pair began its consolidation phase in early July. Since that time we have seen a triple top form at major CHF Support, at 1.06. We know, based on our prior technical analysis that 1.06 is also a Fibonacci Retrace level. Therefore, if the Dollar rally is really going to materialize it will need to take out the 1.06 handle. If that happens, you can expect to see significant price action to the upside. We also have to take note though of the 50 MA’s position as it is converging quickly on the 200 MA. If the 50 MA crosses below the 200 MA it would likely generate enough Support for the CHF to take out Resistance below 1.0350
Written by bforex.com