Written on 18/1/2022 by Theunis Kruger, FX Trainer at FXTM
On the H4 time frame, the Euro had a short uptrend that flowed out of a prolonged ranging market. On 14th January, a last higher top was recorded at 1.14829.
A closer look at the Momentum Oscillator revealed a negative divergence between point ‘a’ and ‘b’ when comparing the higher tops at 1.14528 and 1.14829. This could have alerted technical traders that a possible reversal was on the books.
After the higher top at 1.14829, the price broke through the 15 and 34 Simple Moving Averages with the Momentum Oscillator following close behind, changing direction to the downside.
A possible critical support level formed when a lower bottom was recorded on 17th January at 1.13915. The bulls tried to take the market higher, but they could not overtake the bears.
On 18th January, the bears managed to break through the critical support level at 1.13915, and three possible price targets were projected from there. The following targets were calculated by attaching the Fibonacci tool to the bottom at 1.13915 and dragging it to a resistance level at 1.14342. The first target was estimated at 1.13651 (161.8%). The second price target was calculated at 1.13224 (261.8%), and the third and final target may be expected at 1.12533 (423.6%).
If the resistance level at 1.14342 is broken, the above scenario is invalidated, and any open risk must be managed swiftly.
As long as bears keep accumulating momentum, the outlook for the Euro market will remain bearish.
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