Start of Correction for EUR/USD
10/14/2008 1:24 pm EST
(Price on 1st pane, Slow Stochastics on 2nd pane; downtrend line in red; horizontal support/resistance levels in yellow; Fibonacci retracement levels in grey; 50-period simple moving average in light blue.)
Price action on EUR/USD, a daily chart of which is shown, has made an upside turn after having bottomed out at a one-year-plus low of around 1.3260 on Friday of last week. This rebound can be considered a potential correction after the steep downtrend that has been in place for the past three weeks or so.
Continued upside momentum on this correction should target key resistance around 1.3880, which represents not only the last major swing low pivot, but also the most relevant current 38.2% Fibonacci retracement level (the high-to-low retracement span being measured from the swing high on 9/22/2008 to last week's swing low on 10/10/2008).
Oscillators like the displayed Stochastics, which are beginning to emerge up from severely oversold, lend some strength to a bullish outlook on this potential correction. To the downside, support resides around the 1.3450 region, followed eventually by the long-term low in the 1.3260 region.
By James Chen, Chief Technical Analyst, FX Solutions