EUR/USD 1H Chart 10/19/2012 9:30AM EDT
Channel, flag: The EUR/USD topped off yesterday 10/18, and continues to correct against the latest upswing that started last week from 1.2825. The 1H chart shows the decline within a channel, or if this is just a correction pattern, it could become a a flag pattern. A break above the flag pattern, and above the 1.3085 area could be a bullish continuation signal in the short-term.
Support: Until the break above the near-term correction pattern, the focus toward some of the recent support factors. The first one is near the 38.2% retracement at 1.3017, which is also near the Oct. 16 support pivot. Not a major support, but could offer some demand nonetheless. Last week’s high at 1.2996 might be a more important support. Holding above this and 1.30 would be a good sign of continuing bullish development. The bullish outlook gets a bit cloudy below 1.2995. The 1.2980 coincidence of 200-hour SMA and 50% retracement might provide some support as well.
Breakouts: The bearish outlook creeps back into the picture if this “correction” extends below 61.8% retracement, 1.2940, and the rising trendline going back to May 2012. The bullish outlook is also limited at the moment to a declining trendline going back to March 2011. So it might be prudent to start monitoring these trendlines for directional clues in the medium term, outside of these short-term swings we have been observing since mid-September.
EUR/USD 4H Chart 10/19/2012 9:33AM EDT