The break of 1.3045 finally came last night, but there is very little follow through. The 3-day sideways consolidation phase should have produced a more explosive upmove, and the fact that price could only rally 40 points within the first 4 hours of the break may be a sign that the Dollar is about to make a comeback. The EURUSD is facing strong resistance in the 1.3120…1.3130 area, where the 61.8% Fibo retracement level of the 1.5143-1.1875 range lies, and the 1.27 extension of a recent hourly range. There is a bearish divergence forming on the daily RSI chart. Hourly RSI is bullish looking with a break above the rising trend line, but is in overbought territory.
Many other currency pairs (AUSUSD, NZDUSD, USDCHF, USDCAD) are at major key support/resistance levels, and show early signs of topping/bottoming out. It’s too early to declare the beginning of a USD rally yet, but the evidence is mounting that it may just be around the corner (we may see it within a day or two).
I went short at 1.3092 with a tight stop at 1.3145. This is clearly a trade against the daily trend, but low risk/return and major structure support in the 1.3090..1.3125 area are in favor of the trade. The 1.3090 area was also major resistance in late 2008 and early 2009. 1.3250 is a too obvious resistance area and would encounter a whole army of bears that will go against it at that level. I believe it is likely we will see the pair roll over ahead of this level, and the 1.3090…1.3125 level may well be it.
My short entry at this level is also attempting to trade a 3-Drives pattern that has formed on the daily chart in the 1.1875-1.3106 range. Target for the trade is 1.2345, the 38.2% level of this range.
Hourly Chart:

Daily Chart:
