EUR/USD 4H Chart 8/21/2012 7:00AM EDT
The EUR/USD broke above last week’s high of 1.2385 during the 8/21 Asian-European trading session. The 4H RSI shows persistent bullish momentum developing, as it tags 70, holds above 40, and now breaks above 60 reaching toward 70 again. Price is now trading at a declining trendline going back to the June highs near 1.2750. The more important resistance is the August high at 1.2440. A break above 1.2450 should clear the trendline and August high, exposing the resistance from the June highs at 1.2385 and 1.2440.
This bullish scenario looks more clear if there is a throwback and the market holds above the 1.2380 area. Otherwise, a break below 1.23 while failing to break above 1.2440 continues to reflect a range-bound market, with a break below 1.2240 to be a sign of a topping.
GBP/USD Daily Chart 8/21/2012 7:10AM EDT
For the GBP/USD, we look at the daily chart because the market has basically been coiling in an ascending triangle since the start of June. The 4H momentum is much like EUR/USD’s, but the daily RSI shows a market yet kill the bearish momentum from the May decline from about 1.6300 to 1.5265. The daily momentum in the EUR/USD is similar to that of GBP/USD’s.
Focusing on the GBP/USD and the triangle resistance, we see that the 1.5775 resistance is basically near the 50% retracement of that May decline. A break above opens up the 61.8% retracement at 1.5908. There is also a resistance pivot near 1.5930. Above these near-term targets, the break also exposes the 1.63 high. This bullish scenario is more clear if the market can hold above 1.57 after some kind of throwback after breakout and keep pushing, confirming respect of the triangle pattern as a base. A break below 1.56 is probably needed to open up a bearish outlook.