EURUSD has been consolidating since reaching a 2½-year high of 1.1909 on August 2. The 50-period moving average (MA) has flatlined on the 4-hour chart, pointing to a neutral bias in the short term and indicating that the strong rally that began in April has run out of steam.
However, the risk is to the upside as both the RSI and the MACD are in bullish territory. The RSI is trending down but remains comfortably above 50, while the MACD histogram is just above the red signal line.
To regain upside momentum, prices would need to break above the 23.6% Fibonacci retracement level of the July-August upleg from 1.1479 to 1.1909. The 23.6% Fibonacci level is also the 1.18 handle. A sustained rise above this level would open the towards the August peak of 1.1909, but before then, the pair might meet a hurdle at around the 1.1845 area, which previously acted as resistance. A break above 1.1909 would signal a resumption of the uptrend and reinforce the bullish outlook in the medium-term. The next key resistance after this point is the psychological 1.20 level.
To the downside, the 50-period MA at 1.1632 should be watched as a drop below this line would weaken the positive short-term bias, if not, push it to negative. Further down, support should come from the 38.2% and 50% Fibonacci levels at 1.1745 and 1.1695 respectively. Failure to hold above the 50% Fibonacci level could lead to a sharper correction and bring into view the 200-period MA (currently at 1.1665).
A drop below the 200-period MA could accelerate the decline towards the 50-day moving average on the daily chart, which is currently around 1.1560, threatening the medium-term bullish structure.
