EUR/CHF 4H chart 7/9/2013 3:30PM ET
(click to enlarge)
Breakout: The EUR/CHF has been consolidating roughly between 1.2218 and 1.2365. In the previous update, we noted the EUR/CHF’s retreat from consolidation resistance, but also respect of the 1.2285-90 central pivot area, which kept a bullish bias within consolidation. Price action then followed with a break above the consolidation resistance as shown in the 4H chart. You can see that going back to 6/24 low at 1.2218 that price action has been anchored in a rising channel.
This breakout has opened up the 61.8% retracement at 1.2484, which is near a previous resistance pivot from 6/3. Above that we have the 5/28 resistance pivot and 78.6% retracement around 1.2556.
Throwback: The 4H chart shows an RSI reading that is above 70, which shows bullish momentum but also near-term overbought condition. If we get a throwback, the previous resistance around 1.2365 should be monitored for support, especially if it coincides with the rising trendline from 6/24.
Breakdown: A break below the rising trendline and below the 200-SMA in the 4H chart would neutralize the bullish outlook and put the market back to sideways or even bearish mode. If the RSI still holds above 40 however, momentum in this time-frame is still bullish. Otherwise, the focus would return to the 1.2285-90 pivot area, and then the 1.2218 low.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.