EUR/USD 4H chart 2/12/2013 8:43AM EST
Falling channel: The EUR/USD can be seen in a falling channel since the beginning of February when it fell from the 1.37 handle. The 4H chart shows this structure as well as the RSI tagging 30, which reflects bearish momentum in this time-frame. The week started with a range between 1.3430 and 1.3352 and the 2/12 European session pushed price above this range. As we enter the 2/12 US session, price is testing the falling channel resistance.
Breakout scenario: Note that as price nears 1.3475-80 area, it encounters not only the channel resistance but a previous support/resistance pivot. A break above this will be needed to clear the channel and bring about some bullish outlook, especially if it can extend above the 1.35 psychological handle. This can put pressure on the 1.36 and 1.37 clips, which were also resistance pivots before.
If the RSI pushes above 60, the bearish momentum is lost, and the correction is seen as flat, OR completed. A push above 1.37 confirms the completed correction and usher in bullish continuation with 61.8% retracement of 2011-2012 bear trend at 1.3827, which is also a previous support pivot in July 2011.
Failure: Failure to the upside (such as failure to push above 1.35 with the 4H RSI holding below 60), and a return below 1.3350 has room towards 1.3255, support from a previous consolidation in January.