EUR/USD 1H Chart 8/10/2012 6:45AM EDT
Following up with the latest EUR/USD update, we now see the pair sitting around the swing projection target of 1.2270 after reaching a new low for the week during the 8/10 European session at 1.2260.The RSI reading shows a tad bullish divergence showing a slowing of the decline relative to the swing during the 8/9 session.
The 50% retracement at 1.2240 and the 1.2250 handle is an area of support, but the key factor to monitor now is the rising trendline seen in the 4H chart. This is around the 1.22 psychological handle, and 1.2195, the 61.8% retraement of the 1.2042 to 1.2442 bull run. Below these factors, the market opens up the 1.2130 pivot near the 78.6% retracement, and then the 1.2042.
In a higher degree, the trendline break scenario opens up a bearish continuation scenario toward 1.20 psychological level and 1.19, 2010-low.
Upside Risk: What if we are just in a zig zag bearish correction? The market is showing some bullish divergence in the 1H with the RSI as price tags a declining channel support, and the 4H RSI is at 40, where a bullish market tends to be done with a corrective cycle. Below the 8/10 session high near 1.23, the bearish scenario looks very good, but looks unclear between 1.23 and 1.2350.
The bullish scenario then opens up with a break above the 1.2350, or the declining trendline seen in the 1H chart. We can say that there is upside risk to 1.2350 as we head towards some key support factors with near-term bearish momentum.
EUR/USD 4H Chart 8/10/2012 6:50AM EDT