By Russell Glaser – A breakout yesterday during the New York trading session took the EUR/USD above a key consolidation pattern and a resistance level that has held for over a month. In order to avoid a false breakout, the pair will need to close above the long term downward trend line that begins in December of 2009.
Yesterday, the pair originally sold off following worse than expected German economic expectations. However, later in the day the EUR/USD rallied after US Retail Sales data helped to boost risk sensitive currencies. This continued the bullish move for the pair and helped push the price above the resistance level at 1.2930 that has held for the last month.
The rise in price was as high as 1.3030 and completes the ascending triangle pattern. However, the breakout to the upside was capped by the falling trend line that begins in early December of 2009. This will serve as the first resistance level for EUR/USD at 1.3030 (R1), followed by the low from August 10th at 1.3070 (R2).
A breach above the rising trend line would set up an opportunity to go long on the EUR/USD to with a target of R2. But should the rally stall at the long term downward trend line, the recent gains could unravel and the pair may fall back into the consolidation pattern, targeting the rising lower boundary line at 1.2730.
Forex Market Analysis provided by ForexYard.
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