EUR/USD 1H Chart 12/5/2012 7:30AM EST
Bullish: The EUR/USD has been bullish so far in December, coming off the most recent bull run that started mid Nov. from 1.2660.The most recent leg of this rally was from last Thursday (11/28) to today (12/5) from 1.2880 to 1.3126.
Retracement: The 11/5 European session traded the EUR/USD down below 1.31, around 1.3065 as the market gears up for the 11/5 US session. This retracement has some more room before meeting a rising trendline probably around 1.3050 if the EUR/USD indeed falls further in the next couple of hours. Holding price above the 1.3050 and the RSI above 40 (given some brief elbow room), would be a sign of maintained bullish mode even in the short-term. However, if the US session extends the European session throwback, we might have a consolidation of a larger degree.
Outlooks: A trend approach sees the EUR/USD in a bullish market, and the bearish outlook should be shelved unless there is a break below 1.30, in which case the EUR/USD signals a bearish correction, still in the contexts of a bullish market until a break below 1.2880, in which case a bearish outlook is born. A counter-trend approach can see the EUR/USD slightly extended to the upside. I would say there is still some room until the resistance zone between 1.3138 and 1.3170 highs, but today’s throwback could well be the market defending this resistance area already.
The market can also start to get antsy or uncertain ahead of tomorrow’s ECB risk event. It is probably prudent to look for more technical signals after Draghi’s press conference. An important question is whether the EUR/USD can extend the current trend above 1.3170, in which case a major bullish breakout would be at hand.