Breakout Time for EUR/USD?
12/12/2008 10:25 am EST
(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend line in green; downtrend line in red; horizontal support/resistance levels in yellow; chart pattern in magenta; Fibonacci retracement levels in grey; 50-period simple moving average in light blue.)
Thursday’s price action on EUR/USD (a daily chart of which is shown) has made a decisive bullish break of the triangle consolidation that it had been entrenched in for the last month and a half. This eagerly anticipated breakout has reached up to the key 1.3250-1.3300 resistance target, as of this writing. This zone represents both a significant prior support/resistance level and a key 38.2% Fibonacci retracement level.
Any substantial break above this price region (i.e., the 1.3300 level) would likely indicate that a significant upside correction could be in the midst of occurring. In this event, further major resistance to the upside should reside around the downtrend resistance line (in red), and then eventually, with any further upside momentum, the key 1.3880 level. A failure to break convincingly above the 1.3300 resistance zone, however, could mean an eventual retreat back down to support in the region of the triangle border.
By James Chen, Chief Technical Analyst, FX Solutions