Significant Area for EUR/USD

01/13/2009 11:50 am EST

Focus: FOREX

(Price on 1st pane; Slow Stochastics on 2nd pane; downtrend line in red; horizontal support/resistance lines in yellow; chart pattern in magenta; Fibonacci retracements in grey; 50-period simple moving average in light blue.)

Price action on the EUR/USD daily chart, as shown, has been hovering around a key support/resistance line in the 1.3300 region as of Monday (1/12/09) morning in New York. This price level represents very significant prior support/resistance, as price has hit and turned off this level several times in the recent past. Therefore, any substantial breakdown and close below this level should be a significant technical event.

Immediately below this level is also a key downtrend line that price broke out above in mid-December. This line now serves as dynamic support for the pair. Therefore, a breakdown below this line should lend even more significance and momentum to a potential break below the 1.3300 level. If these breaks indeed occur, price action will have confirmed a continuation of the short-term downtrend that began in late December. In this event, the major support target to the downside resides around the 1.2330 region, which is the level of the last long-term swing low in the pair.

Before that, however, intermediate support resides in the general 1.3050 region. If price ultimately breaks down strongly below the 1.2330 region, a continuation of the overall downtrend that began in July 2008 will have been confirmed.

By James Chen, Chief Technical Analyst, FX Solutions

Related Articles on FOREX