NEW YORK (Forex News Now) – In recent currency market trading, EUR/USD consolidated during the early part of last week, making its weekly low point of 1.3070 last Monday, before then trading sharply higher as far as 1.3423 on Friday. The rate then softened significantly to end last week and the year of 2010 at 1.3361. Thus far, these higher levels have been sustained early this week, with additional progress to the upside seen today to the 1.3432 level as the rate trades higher within an ascending channel pattern on the hourly chart.
While the rate dipped briefly under its key 200-day Moving Average during Monday and Wednesday of last week, it rallied to close the week and the year substantially above the indicator’s present level of 1.3084. This indicator has now flattened out to yield a neutral medium term outlook for the pair.
Furthermore, the price action observed last week and early this week has remained within the overall consolidation pattern that is now taking on the appearance of a triangle that EUR/USD has traded in recently above the important 1.2968 low seen on November 30th. The price action encapsulated within the short term up channel highlighted on the hourly chart currently appears to make up the third wave of this triangular pattern, with a reaction lower for EUR/USD now anticipated from intraday analysis in order for this scenario to pan out.
With the EUR/USD rate currently trading at 1.3317, support for EUR/USD shows initially at 1.3273 and in the 1.3055/83 region, and then below that at 1.2968 and 1.2829. Resistance to the topside is seen initially in the 1.3423/32 region, and then above that at 1.3498 and at 1.3785.
Overall, this EURUSD analysis scenario shows a short term corrective rally occurring within an overall triangular consolidation pattern that could soon be reversed to the downside for a test of the lower of the triangle’s converging trend lines. Nevertheless, good support for EURUSD at 1.2968 is currently expected to hold in the near term.
Chart 1: Side by side Hourly (left) and Daily (right) candlestick charts of EUR/USD showing Bollinger Bands in pale green, its 200-period MA in red, trend lines in purple and the 14-period RSI in pale blue in the indicator box below the charts.